Cumulated Balance Sheet Sample Problem Consider the Cumulated Balance Sheets for the Federal Reserve System and...

 

Transcribed Image Text:

Cumulated Balance Sheet Sample Problem Consider the Cumulated Balance Sheets for the Federal Reserve System and the Commercial Banking System. All figures are in billions of US dollars. Federal Reserve System Commercial Banking System Assets Liabilities Liabilities Assets Securities Reserves of CBS Reserves $85 billion Demand Deposits -$135 billion Loans to CBS -$85 billion - $160 billion Treasury Deposits Loans $58 billion $75 billion -$45 billion Currency in Circulation -$80 billion Loans from the FED $75 billion Securities $45 billion Currency -$47 billion Show the effect of the following transactions on balance sheets of the FED and the Commercial Banking System. Show how each transaction causes the money supply (M1) to change. Do not cumulate your answers, T1. Because the FED lowered is, Commercial Banks borrow $8 Billion from the Fed. T2. The FED sells $5 billion in securities to the Public, who pay with personal & business checks. T3. Because the FED raised in & ia, Customers of Commercial Banks pay off $15 billion in personal and commercial loans. T4. The FED buys $10 billion in securities from Commercial Banks. T5. Commercial banks order $9 billion in new currency from the FED. Cumulated Balance Sheet Sample Problem Consider the Cumulated Balance Sheets for the Federal Reserve System and the Commercial Banking System. All figures are in billions of US dollars. Federal Reserve System Commercial Banking System Assets Liabilities Liabilities Assets Securities Reserves of CBS Reserves $85 billion Demand Deposits -$135 billion Loans to CBS -$85 billion - $160 billion Treasury Deposits Loans $58 billion $75 billion -$45 billion Currency in Circulation -$80 billion Loans from the FED $75 billion Securities $45 billion Currency -$47 billion Show the effect of the following transactions on balance sheets of the FED and the Commercial Banking System. Show how each transaction causes the money supply (M1) to change. Do not cumulate your answers, T1. Because the FED lowered is, Commercial Banks borrow $8 Billion from the Fed. T2. The FED sells $5 billion in securities to the Public, who pay with personal & business checks. T3. Because the FED raised in & ia, Customers of Commercial Banks pay off $15 billion in personal and commercial loans. T4. The FED buys $10 billion in securities from Commercial Banks. T5. Commercial banks order $9 billion in new currency from the FED.