t Start with the Wednesday balance sheet for The Friendly Bank shown below (page 322 in the text). Suppose on Thursday, the Fed buys $100 in government bonds. Complete entries for Thursday and Friday, assuming everyone behaves the same way as in the text.   Balance Sheet on Wednesday C R D MB M2 Asset                             Liabilities R      680                   D      1280   320   680   1280   1000   1600 L      600           Balance Sheet on Thursday C R D MB M2 Asset                    Liabilities Balance Sheet on Friday C R D MB M2 Asset                    Liabilities

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A: Please refer solution tab for detailed answer

Q: Reserves $ 25 Securities 75 Loans 200

A: Excess reserve  Amount of reserve =   $25 Required (200 X 5%) =$10 Excess amount         =$15

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