HEARTfelt Bank currently has $200 million in transaction deposits on its balance sheet. The Federal Reserve has
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Question:
HEARTfelt Bank currently has $200 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 8 percent of transaction deposits.
1. Show the HEARTfelt Bank and Federal Reserve before there is a change in reserve requirements.
2. Now assume the Fed changes reserve requirement to 7%.
Assume HEARTfelt withdraws all excess reserves and gives out loans and assume that borrowers eventually return 90% of the funds to HEARTfelt in the form of transaction depositions.
Show the new balance sheet of HEARTfelt and the Fed.
Related Book For
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders , Marcia Cornett
Posted Date: