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MHM Bank currently has $250 million in transaction deposits on its balance sheet The current reserve requirement is 8 percent but the Federal Reserve is increasing this requirement to 10 percent

MHM Bank currently has $250 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent.

a.

Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 60 percent of these funds to MHM Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate calculations. Round your "Panel B" answers to 3 decimal places. (e.g., 32.161))

Panel B: Balance sheet after all changes

Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts 80 percent of its excess reserves to loans and borrowers return 90 percent of these funds to MHM Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate calculations. Round your "Panel B" answers to 3 decimal places. (e.g., 32.161))


Panel A: Initial balance sheets
Panel B: Balance sheet after all changes

 

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May 14 2020 View more View Less

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