In each of the following, discuss the effects on the Fed's and the bank's assets and liabilities:

a. You borrow $30,000 from a bank to buy a car

b. You deposit $1000 in your checking account at local bank

c. A bank borrows $1 million on federal funds market.

a. You borrow $30,000 from a bank to buy a car

When we borrow 30,000 from a bank it has no impact on the banks liabilities and they remain the same. However when they lend us 30,000 on of their asset which is cash decreases by 30,000 as they are giving us 30,000 cash and another asset of theirs accounts receivables increases by 30,000 because we now owe the bank 30,000. So the net assets of the bank remain the same

b. You deposit $1000 in your checking account at local bank

When we deposit a $1000 in the bank, the banks asset of cash increases by 1,000 as they are getting 1,000 in cash from us and their liability of accounts payable increases by 1,000 as they now owe us 1,000. So when we deposit 1,000 in the bank their assets and liabilities both increase by 1,000.

c. A bank borrows $1 million on federal funds market.

When a bank borrows 1 million from the federal funds market, their asset of cash increases by 1 million as they are receiving 1 million, and their liability of accounts receivable increases by 1 million as they now owe 1 million to the federal funds market. So in net both the banks assets and liabilities increase by 1 million

The effect on the Feds is that the there is no impact on the Feds liabilities and they remain the same. And on the assets side the feds asset of cash decreases by 1 million as they are giving 1 million to the bank and their asset of accounts receivable increases by 1 million as now the bank owes them 1 million