Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets Liabilities and Net Worth (Billions of Dollars) Total reserves 10 Checkable deposits 25 Loans 5     Securities 10     Total 25 Total 25   What is the required reserve ratio?

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Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves.
Assets
Liabilities and Net Worth
(Billions of Dollars)
Total reserves 10 Checkable deposits 25
Loans 5    
Securities 10    
Total 25 Total 25
 
What is the required reserve ratio?
5%
 
40%
 
25%
 
10%
 
 
Suppose that the Federal Reserve (the "Fed") sells $3 million of bonds to a bond dealer, who pays the Fed by writing a check against the funds in her checking account. What is the initial impact of this transaction?
The banking system's holdings of securities fall by $3 million, and the banking system's total reserves rise by $3 million.
 
Checkable deposits fall by $3 million, and the banking system's total reserves fall by $3 million.
 
Checkable deposits fall by $3 million, and the banking system's holdings of securities fall by $3 million.
 
The banking system's holdings of securities rise by $3 million, and the banking system's total reserves fall by $3 million.
 
 
As a result of the Fed's sale of $3 million of securities, checkable deposits in the banking system can potentially    by as much as    .
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