In the tables that follow you will find consolidated balance sheets for the commercial banking system and the 12 Federal Reserve Banks. Use columns 1 through 3 to indicate how the balance sheets would read after each of transactions a to cis completed. Do not cumulate your answers; that is, analyze each transaction separately, starting in each case from the numbers provided. All accounts are in billions of dollars. Instructions: Enter your answers as a whole number. Consolidated Balance Sheet: All Commercial Banks Assets: Reserves $33 Securities 60 Loans 60 Liabilities and net worth: Checkable deposits $150 Loans from the Federal Reserve Banks 3 Customize and control Google Consolidated Balance Sheet: 12 Federal Reserve Banks Assets: Securities $60 Loans to commercial banks Liabilities and net worth: Reserves of commercial banks $33 Treasury deposits 3 Federal Reserve Notes 27 a. A decline in the discount rate prompts commercial banks to borrow an additional $1 billion from the Federal Reserve Banks. Show the new balance sheet numbers in column 1 of each table. b. The Federal Reserve Banks sell $3 billion in securities to members of the public, who pay for the bonds with checks. Show the new balance sheet numbers in column 2 of each table. .The Federal Reserve Banks buy $2 billion of securities from commercial banks. Show the new balance sheet numbers in column 3 of each table.
In the tables that follow you will find consolidated balance sheets for the commercial banking system and the 12 Federal Reserve Banks. Use columns 1 through 3 to indicate how the balance sheets would read after each of transactions a to cis completed. Do not cumulate your answers; that is, analyze each transaction separately, starting in each case from the numbers provided. All accounts are in billions of dollars. Instructions: Enter your answers as a whole number. Consolidated Balance Sheet: All Commercial Banks Assets: Reserves $33 Securities 60 Loans 60 Liabilities and net worth: Checkable deposits $150 Loans from the Federal Reserve Banks 3 Customize and control Google Consolidated Balance Sheet: 12 Federal Reserve Banks Assets: Securities $60 Loans to commercial banks Liabilities and net worth: Reserves of commercial banks $33 Treasury deposits 3 Federal Reserve Notes 27 a. A decline in the discount rate prompts commercial banks to borrow an additional $1 billion from the Federal Reserve Banks. Show the new balance sheet numbers in column 1 of each table. b. The Federal Reserve Banks sell $3 billion in securities to members of the public, who pay for the bonds with checks. Show the new balance sheet numbers in column 2 of each table. .The Federal Reserve Banks buy $2 billion of securities from commercial banks. Show the new balance sheet numbers in column 3 of each table.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:In the tables that follow you will find consolidated balance sheets for the commercial banking system and the 12 Federal Reserve
Banks. Use columns 1 through 3 to indicate how the balance sheets would read after each of transactions a to cis completed. Do not
cumulate your answers; that is, analyze each transaction separately, starting in each case from the numbers provided. All accounts are
in billions of dollars.
Instructions: Enter your answers as a whole number.
Consolidated Balance Sheet: All Commercial Banks
1
2
Assets:
Reserves
$33
Securities
60
Loans
60
Liabilities and net worth:
Checkable deposits
$150
Loans from the Federal Reserve Banks
3
Customize and control Google
Consolidated Balance Sheet: 12 Federal Reserve Banks
1
Assets:
Securities
$60
Loans to commercial banks
3
Liabilities and net worth:
Reserves of commercial banks
$33
Treasury deposits
3
Federal Reserve Notes
27
a. A decline in the discount rate prompts commercial banks to borrow an additional $1 billion from the Federal Reserve Banks. Show
the new balance sheet numbers in column 1 of each table.
b. The Federal Reserve Banks sell $3 billion in securities to members of the public, who pay for the bonds with checks. Show the new
balance sheet numbers in column 2 of each table.
c. The Federal Reserve Banks buy $2 billion of securities from commercial banks. Show the new balance sheet numbers in column 3
of each table.
d. Now review each of the above three transactions, asking yourself these three questions: (1) What change, if any, took place in the
money supply as a direct and immediate result of each transaction? (2) What increase or decrease in the commercial banks' reserves
took place in each transaction? (3) Assuming a reserve ratio of 20 percent, what change in the money-creating potential of the
commercial banking system occurred as a result of each transaction?
Transaction a:
(1) The money supply (Click to select) V
(2) Reserves (Click to select)
V
from $33 billion to $
billion
(3) The money-creating potential (Click to select)
by $
billion.
Transaction b:
(1) The money supply (Click to select) V by $
billion.
(2) Reserves (Click to select) V from $33 billion to
billion.
(3) The money-creating potential (Click to select)
by $
billion.
Transaction c
(1) The money supply (Click to select)
(2) Reserves (Click to select)
7from $33 billion to $
billion.
(3) The money-creating potential (Click to select)
by $
billion.
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