Consider the balance sheet of the Fed in Table 24-1.Construct a corresponding balance sheet for banks (like the one in Table 23-3 in the previous chapter) assuming that reserve requirements are 10 percent on checking accounts and zero on everything else.
a. Construct a new set of balance sheets, assuming that the Fed sells $1 billion worth of government securities through open-market operations.
b. Construct another set of balance sheets, assuming that the Fed increases reserve requirements from 10 to 20 percent.
c. Assume that banks borrow $1 billion worth of reserves from the Fed. How will this action change the balance sheets?