The First Federal Bank has demand deposit liabilities of $400,000, cash reserves of $75,000, loans of $225,000, and government securities of $100,000. The reserve requirement is 12 percent.
a. Show the bank's balance sheet.
b. Show the bank's balance sheet after the Fed buys $25,000 of securities from the bank.
c. After completion of the transaction in part b, how much excess reserves does the bank have? By how much did they increase?

Question

Quizplus · Accepted Answer

The Answer is a.

\begin{array} { | l | l | } \hline ext { Assets } & ext { Liabilities } \\hline & \\hline ext { Reserves } \$ 75,000 & ext { Demand Deposits } \$ 400,000 \\hline ext { Loans } \$ 225,000 & \\hline ext { Securities } \$ 100,000 & \\hline\end{array}

b.

\begin{array} { | l | l | } \hline ext { Assets } & ext { Liabilities } \\hline & \\hline ext { Reserves } \$ 100,000 & ext { Demand Deposits } \$ 400,000 \\hline ext { Loans } \$ 225,000 & \\hline ext { Securities } \$ 75,000 & \\hline\end{array}

c. $52,000

The First Federal Bank Has Demand Deposit Liabilities of $400,000