Show the balance sheet of the federal reserve and mhm bank

Reference no: EM132182361

Question - MHM Bank currently has $700 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent.

a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 60 percent of these funds to MHM Bank as transaction deposits.

b. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts 75 percent of its excess reserves to loans and borrowers return 80 percent of these funds to MHM Bank as transaction deposits.

Reference no: EM132182361

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