a) Present a CONSOLIDATED balance sheet (a T-account summarizing the assets and liabilities of all commercial banks in the system) with the following information:
The reserve ratio is 32 percent and the total amount of required reserves held by the banks is $300 billion. The banks are all "loaned up" (i.e. no excess reserve is held).
b) Now suppose the Fed, after considering the level of money supply in the economy, decided to sell $60 billion worth of government bonds on the open market.
Present CONSOLIDATED balance sheet showing possible changes in the demand deposits to be brought about this action of the Fed. The reserve ratio is still 32 percent and the usual assumptions about the banking system hold.