Question

novo, bonds 3.000, cu hesores 1.200,000 loans 7,800,000 Valere Bank: Liabilities 7, w poo Assets loans 3,209000 Bucures 700,000 Donds 3,100,000 b. Now suppose the Fed purchases $2 million worth of government bonds from Lion Bank. Suppose Lion Bank does not make any adjustments to its reserves. Depict its balance sheet immediately after the Fed's purchase. Liabilities 12,00, VO د نه راه,1 Assets Bords Reserves 1,200,000 Loung 9,800,000 c. Now suppose Lion Bank adjusts its loans such that it is once again holding the Econ 1 Summer 2020 Problem Set 6 Due 21:00 PDT (Opm in California) Thursday, July 30 minimum allowed amount of currency in reserves. To do so it lends out the money to Bell Industries. How much would it lend? Depict Lion Bank's balance sheet.

Answer 1

b. Loans don't go up in this scenario. Reserves do

Assets		Liabilities
Bonds	1000000		12000000
Reserves	3200000
Loans	7800000
Total	12000000		12000000

c. Loans go up in this scenario, as the bank reduces its reserves and lends to Bell

Assets		Liabilities
Bonds	1000000		12000000
Reserves	1200000
Loans	9800000
Total	12000000		12000000