Question
13 (Part 2) and Chapter 14 Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The
13 (Part 2) and Chapter 14 Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 20%. The Federal Reserve buys a government bond worth $1,500,000 from Andrew, a client of First Main Street Bank. He deposits the money into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's balance sheet (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20% Hint: If the change is negative, be sure to enter the value as a negative number. Amount Deposited (Dollars) 1,500,000 Change in Excess Reserves (Dollars) Change in Required Reserves (Dollars) Now, suppose First Main Street Bank loans out all of its new excess reserves to Teresa, who immediately writes a check for the full amount to Sam Sam then immediately deposits the funds in his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Andrew, who writes a check to Beth, who deposits the money in her account at Third Fidelity Bank. Finally, Third Fidelity lends out all of its new excess reserves to Eleanor. Fill in the following table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar Q Search this course
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