Use commercial bank and Federal Reserve Bank balance sheets to demonstrate the immediate effect of each of the following transactions on commercial bank reserves. Assume that the initial reserve ratio is 20 percent Fill in the new balance in the column in the balance sheet that corresponds with each of the following transactions. Consider each transaction separately, not cumulatively a. Federal Reserve Banks purchase $2 billion worth of securities from banks b. Commercial banks borrow $1 billion from Federal Reserve Banks at the discount rate. c. The Fed reduces the reserve ratio from 20 percent to 19 percent Instructions: Enter your answers as whole numbers in the gray-shaded cells of both tables below Consolidated Balance Sheet All Commercial Banks ces A Assets: Reserves $40 Securities 60 Loans 102 Liabilities and net worth: Checkable deposits 200 Loans from the Feceral Reserve Banks 2 Consolidated Balance Sheet: 12 Federal Reserve Banks C Assets: Securities $283 Loans to commercial banks 2 Liabilities and net worth: Reserves of commercial banks 40 Treasury deposits 5 Federal Reserve Notes 225 Other liabilities and net worth d. Commercial banks increase their reserves after the Fed increases the interest rate it pays on reserves Which of the columns above could represent this action? (Cick to select)
Use commercial bank and Federal Reserve Bank balance sheets to demonstrate the immediate effect of each of the following transactions on commercial bank reserves. Assume that the initial reserve ratio is 20 percent Fill in the new balance in the column in the balance sheet that corresponds with each of the following transactions. Consider each transaction separately, not cumulatively a. Federal Reserve Banks purchase $2 billion worth of securities from banks b. Commercial banks borrow $1 billion from Federal Reserve Banks at the discount rate. c. The Fed reduces the reserve ratio from 20 percent to 19 percent Instructions: Enter your answers as whole numbers in the gray-shaded cells of both tables below Consolidated Balance Sheet All Commercial Banks ces A Assets: Reserves $40 Securities 60 Loans 102 Liabilities and net worth: Checkable deposits 200 Loans from the Feceral Reserve Banks 2 Consolidated Balance Sheet: 12 Federal Reserve Banks C Assets: Securities $283 Loans to commercial banks 2 Liabilities and net worth: Reserves of commercial banks 40 Treasury deposits 5 Federal Reserve Notes 225 Other liabilities and net worth d. Commercial banks increase their reserves after the Fed increases the interest rate it pays on reserves Which of the columns above could represent this action? (Cick to select)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter24: The Influence Of Monetary And Fiscal Policy On Aggregate Demand
Section: Chapter Questions
Problem 1PA
Related questions
Question
Transcribed Image Text:Use commercial bank and Federal Reserve Bank balance sheets to demonstrate the immediate effect of each of the following
transactions on commercial bank reserves. Assume that the initial reserve ratio is 20 percent Fill in the new balance in the column in
the balance sheet that corresponds with each of the following transactions. Consider each transaction separately, not cumulatively
a. Federal Reserve Banks purchase $2 billion worth of securities from banks
b. Commercial banks borrow $1 billion from Federal Reserve Banks at the discount rate.
c. The Fed reduces the reserve ratio from 20 percent to 19 percent
Instructions: Enter your answers as whole numbers in the gray-shaded cells of both tables below
Consolidated Balance Sheet All Commercial Banks
ces
A
Assets:
Reserves
$40
Securities
60
Loans
102
Liabilities and net worth:
Checkable deposits
200
Loans from the Feceral Reserve
Banks
2
Transcribed Image Text:Consolidated Balance Sheet: 12 Federal Reserve Banks
C
Assets:
Securities
$283
Loans to commercial banks
2
Liabilities and net worth:
Reserves of commercial banks
40
Treasury deposits
5
Federal Reserve Notes
225
Other liabilities and net worth
d. Commercial banks increase their reserves after the Fed increases the interest rate it pays on reserves Which of the columns above
could represent this action?
(Cick to select)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
Recommended textbooks for you
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781305971509
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning