Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 29 - Part X - The Monetary System - Problems and Applications - Page 631: 3

Answer

a) Please see the first image (for the T-accounts). b) Please see the second image (for the T-accounts).

Work Step by Step

c) Since BSB had to decrease their loan holdings, other banks will likely cut back on loans as well. d) The bank might have to take another way to get to the second T-account since the loans already taken out are for a fixed time frame. The bank could try to get more deposits (to get closer to the reserve ratio) or borrow funds from the Fed or other banks.
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