National Bank currently has $450 million in transaction deposits on its balance sheet. The current reserve...

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Finance

National Bank currently has $450 million in transaction depositson its balance sheet. The current reserve requirement is 12percent, but the Federal Reserve is decreasing this requirement to10 percent.

a. Show the balance sheet of the Federal Reserveand National Bank if National Bank converts all excess reserves toloans, but borrowers return only 50 percent of these funds toNational Bank as transaction deposits.
b. Show the balance sheet of the Federal Reserveand National Bank if National Bank converts 75 percent of itsexcess reserves to loans and borrowers return 60 percent of thesefunds to National Bank as transaction deposits.

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Ans aThe balance sheet of the Federal Reserve and National Bank whenNational See Answer

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National Bank currently has $450 million in transaction depositson its balance sheet. The current reserve requirement is 12percent, but the Federal Reserve is decreasing this requirement to10 percent.a. Show the balance sheet of the Federal Reserveand National Bank if National Bank converts all excess reserves toloans, but borrowers return only 50 percent of these funds toNational Bank as transaction deposits.b. Show the balance sheet of the Federal Reserveand National Bank if National Bank converts 75 percent of itsexcess reserves to loans and borrowers return 60 percent of thesefunds to National Bank as transaction deposits.