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BSW Bank currently has S700 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 8 percent of transaction deposits. a. If the Federal Reserve decreases the reserve requirement to 5 percent, show the balance sheet of BSW and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume BSW withdraws all excess reserves and gives out loans, and that borrowers eventually return all of these funds to BSW in the form of transaction deposits. (Do not round intermediate calculations. Enter your answers in millions rounded to the nearest dollar amount.) Panel A: Initial balance sheets Federal Reserve Bank Assets Liabilities 56 million 58 million Reserve accounts BSW Bank Assets Liabilities Loans 644 million Transaction deposits 700 million Reserve deposits at Fed million Panel B: Balance sheet after all changes Federal Reserve Bank Assets Liabilities s50 million Securities 58 million Reserve accounts BSW Bank Assets Liabilities Click to select) Reserve deposits at Fed 1064 million Transaction 1120 million 58 million b. Redo part (a) using a 10 percent reserve requirement. (Do not round intermediate calculations. Enter your answers in millions rounded to the nearest dollar amount.) Panel A: Initial balance sheets Federal Reserve Bank Assets Liabilities 58 million Reserve accounts 58 million BSW Bank Assets Liabilities Loans 630 million Transaction deposits 700 million Reserve deposits at Fed 56 millon Panel B: Balance sheet after all changes Federal Reserve Bank Assets Liabilities Securities 58 million Reserve accounts 58 million BSW Bank Assets Liabilities Loans million Transaction million 5 million Reserve accounts

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