= 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 $

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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=
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
$
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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