Suppose again that checkable deposits started off at $400,000 in First Main Street Bank, the required reserve ratio is 15%, with no excess reserves and no cash leakage.

First Main Street Bank takes the entire $8,000 in excess reserves that resulted from the open-market purchase by the Fed and creates a loan for Darnell in a form of a new checkable deposit with a balance of $8,000.

The money supply now is

?.

Then Darnell writes a check for $8,000 to Felix, who immediately deposits the full amount into his checking account at Second Republic Bank.

Complete the following table to show the effect of Felixs deposit on the Second Republic Banks balance sheet.

Assets		Liabilities
Reserves		Checkable Deposits
Loans

Now Second Republic Bank uses the entire $6,800 in excess reserves that resulted from Felixs deposit to create a loan for Janet in the form of a checkable deposit.

The money supply now is

?.

Suppose Second Republic Bank lends all its new excess reserves to Larry, who writes a check to Megan, who deposits the money into her account at Third Fidelity Bank. Then Third Fidelity lends all its new excess reserves to Raphael. Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves.

Under these assumptions, the $8,000 injection into the money supply results in an overall increase of in checkable deposits. Therefore, the total money supply increases to

?.