Suppose that JPMorgan Chase sells $100 million in Treasury bills to the Fed. a.
ID: 1122238 • Letter: S
Question
Suppose that JPMorgan Chase sells $100 million in Treasury bills to the Fed.
a. Use T-accounts to show the immediate impact of this sale on the balance sheets of JPMorgan Chase and the Fed.
b. Suppose that before selling the Treasury bills, JPMorgan Chase had no excess reserves. Suppose that the required reserve ratio is 20%. Suppose that JPMorgan Chase makes the maximum loan it can from the funds acquired by selling the Treasury bills. Use a T-account to show the initial impact of granting the loan on JPMorgan Chase’s balance sheet. Also include on this T-account the transaction from part (a).
Explanation / Answer
a)
b)
JP morgan Aseets Liabilities Reserves = $100 million Treasury bills = -$100 million