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Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Dina, who immediately uses the funds to write a check to
Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Dina, who immediately uses the funds to write a check to Charles. Charles deposits the funds immediately into his checking account at Walls Fergo Bank. Then Walls Fergo Bank lends out all of its new excess reserves to Lorenzo, who writes a check to Juanita, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves to Neha in turn. 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. Increase in Deposits Increase in Required Reserves Increase in Loans (Dollars) (Dollars) (Dollars) Southeast Mutual Bank Walls Fergo Bank PJMorton Bank Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $500,000 injection into the money supply results in an overall increase of V in demand deposits
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