Homework Answers
A) $ 5 million
required reserves = 0.05* 100 = 5
B) $ 95 million
Excess reserves= 100 - 5 = 95
C) $ 95 million
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on its balance sheet. The current reserve requirement is 10
percent, but the Federal Reserve is decreasing this requirement to
8 percent.
a. Show the balance sheet of the Federal Reserve
and National Bank if National Bank converts all excess reserves to
loans, but borrowers return only 50 percent of these funds to
National Bank as transaction deposits.
b. Show the balance sheet of the Federal Reserve
and National Bank if...
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