Consider each transaction separately

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Reference no: EM13802166

Use commercial bank and Federal Reserve Bank balance sheets to demonstrate the immediate effect of each of the following transactions on commercial bank reserves. Assume that the initial reserve ratio is 20 percent. Fill in the new balances in the column in the balance sheets that correspond with each of the following transactions. Consider each transaction separately, not cumulatively.

1. Federal Reserve Banks purchase $2 billion worth of securities from banks.

b. Commercial banks borrow $1 billion from Federal Reserve Banks at the discount rate.

c. The Fed reduces the reserve ratio from 20 percent to 19 percent.

Instructions: Enter your answers as whole numbers in the gray-shaded cells of both tables below.

Reference no: EM13802166

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