= Suppose banks keep no excess reserves and that all banks are currently meeting the reserve requirement. The Federal Reserve then makes an open market purchase of $16,000 from Bank 1. Use the T-account below to show the result of this transaction for Bank 1, assuming Bank 1 keeps no excess reserves after the transaction. (Remember T-accounts show the changes to a bank's balance sheet.) Bank 1's T-account Assets Reserves $0 Liabilities Deposits $0 Loans $16,000 Securities $ - 16000 Assume all of Bank 1's loans of $16,000 are spent by the borrowers and then deposited into Bank 2. Use the T-account below to show the result of this transaction for Bank 2, assuming Bank 2 keeps no excess reserves and the reserve requirement is 10%. (Remember T-accounts show the changes to a bank's balance sheet.) Bank 2's T-account Assets Liabilities Reserves $ Deposits $ Loans $
= Suppose banks keep no excess reserves and that all banks are currently meeting the reserve requirement. The Federal Reserve then makes an open market purchase of $16,000 from Bank 1. Use the T-account below to show the result of this transaction for Bank 1, assuming Bank 1 keeps no excess reserves after the transaction. (Remember T-accounts show the changes to a bank's balance sheet.) Bank 1's T-account Assets Reserves $0 Liabilities Deposits $0 Loans $16,000 Securities $ - 16000 Assume all of Bank 1's loans of $16,000 are spent by the borrowers and then deposited into Bank 2. Use the T-account below to show the result of this transaction for Bank 2, assuming Bank 2 keeps no excess reserves and the reserve requirement is 10%. (Remember T-accounts show the changes to a bank's balance sheet.) Bank 2's T-account Assets Liabilities Reserves $ Deposits $ Loans $
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![=
Suppose banks keep no excess reserves and that all banks are currently meeting the reserve requirement. The Federal Reserve then makes an open
market purchase of $16,000 from Bank 1.
Use the T-account below to show the result of this transaction for Bank 1, assuming Bank 1 keeps no excess reserves after the transaction. (Remember
T-accounts show the changes to a bank's balance sheet.)
Bank 1's T-account
Assets
Reserves $0
Liabilities
Deposits $0
Loans
$16,000
Securities $ - 16000
Assume all of Bank 1's loans of $16,000 are spent by the borrowers and then deposited into Bank 2.
Use the T-account below to show the result of this transaction for Bank 2, assuming Bank 2 keeps no excess reserves and the reserve requirement is
10%. (Remember T-accounts show the changes to a bank's balance sheet.)
Bank 2's T-account
Assets
Liabilities
Reserves
$
Deposits $
Loans
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F65706b5a-e7d2-4009-9d34-000161c1958a%2F6bf58f4a-4788-494c-8eac-aac6beb0da8f%2Fxu7omad_processed.jpeg&w=3840&q=75)
Transcribed Image Text:=
Suppose banks keep no excess reserves and that all banks are currently meeting the reserve requirement. The Federal Reserve then makes an open
market purchase of $16,000 from Bank 1.
Use the T-account below to show the result of this transaction for Bank 1, assuming Bank 1 keeps no excess reserves after the transaction. (Remember
T-accounts show the changes to a bank's balance sheet.)
Bank 1's T-account
Assets
Reserves $0
Liabilities
Deposits $0
Loans
$16,000
Securities $ - 16000
Assume all of Bank 1's loans of $16,000 are spent by the borrowers and then deposited into Bank 2.
Use the T-account below to show the result of this transaction for Bank 2, assuming Bank 2 keeps no excess reserves and the reserve requirement is
10%. (Remember T-accounts show the changes to a bank's balance sheet.)
Bank 2's T-account
Assets
Liabilities
Reserves
$
Deposits $
Loans
$
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