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 Musashi, 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 T-account (before the bank makes any new loans).

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 negative number.

Now, suppose First Main Street Bank loans out all of its new excess reserves to Kyoko, who immediately uses the funds to write a check to Jacques. Jacques deposits the funds immediately into his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Musashi, who writes a check to Rina, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Yvette as well.

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.

Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $1,500,000 injection into the money supply results in an overall increase of ($750,000/ $6,000,000/ $7,500,000) in demand deposits.

Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets Liabilities Building and furniture Deposits Loans C table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is Hi Net worth egative, be sure to enter the value as negative number. Change in Excess Reserves Dollars Change in Required Reserves Dollars Reserves