7. The money creation process Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 20 %. Larry, a client of First Main Street Bank, deposits $750,000 into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets Llabilities Building and furniture Deposits when the required reserve ratio is 20% . Complete the following table to show the effect of a new deposit on excess and required reserves Hint: If the change is negative, be sure to enter the value as negative number. Change In Required Reserves Change in Excess Reserves Amount Deposited (Dollars) (Dollars) (Dollars) 750,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Janet, who immediately uses the funds to write a check to Felix. Felix deposits the funds immediately into his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess her account at Third Fidelity Bank. Third Fidelity lends out all of its reserves to Raphoel, who writes a check to Megan, who deposits the money new excess reserves to Susan in turn. Fill in the following table to show the effe each bank. Enter each answer to the nearest dollar. this ongoing chain of events Increase in Required Reserves Increase in Loans Increase in Deposits (Dollars) (Dollars) (Dollars) First Main Street Bank Second Republic Bank Third Fidelity Bank First Main Street Bank $375,000 Second Republic Bank $3,000,000 Third Fidelity Bank $3,750,000 keeping any excess reserves. Under these Assume this process continues, with each successive loan deposited into a checking account in demand deposits. assumptions, the $750,000 injection into the money supply results in an overall increase of