Suppose the Federal Reserve purchases $100000 of Treasury bonds from you and that you deposit the $100000 into your checking account deposit at Bank Y. Assume that Bank Y has no excess reserves at the time you make your deposit and that the required reserve ratio is 80 percent.

a. Use a T-account to show the initial effect of this transaction on Bank Y's balance sheet.

b. Suppose that Bank Y makes the maximum loan they can from the funds you deposited. Use a T-account to show the initial effect on Bank Y's balance sheet from granting the loan. Also, include in this T-account the transaction from question (a.).

c. Now suppose that whoever took out the loan in question (b) writes a check for this amount and that the person receiving the check deposits it in Bank Z. Show the effect of these transactions on the balance sheet of Bank Y and Bank Z, after the check has been cleared. On the T-account for Bank Y, include the transactions from questions (a) and (b).

d. What is the maximum increase in checking account deposits that can result from your $100000 deposit?

e. What is the maximum increase in the money supply?

(I'm attaching the image for better understanding)

5/26/2021 Homework#2 Question 1 Suppose the Federal Reserve purchases $100000 of Treasury bonds from you and that Not yet answered you deposit the $100000 into your checking account deposit at Bank Y. Assume that Marked out of 26.00 Bank Y has no excess reserves at the time you make your deposit and that the required reserve ratio is 80 percent. a. Use a T-account to show the initial effect of this transaction on Bank Y's balance sheet. Bank Y Assets Liabilities Reserves: + $ Deposits: + b. Suppose that Bank Y makes the maximum loan they can from the funds you deposited. Use a T-account to show the initial effect on Bank Y's balance sheet from granting the loan. Also include in this T-account the transaction from question (a.). Bank Y Assets Liabilities Reserves: $ Deposits: + Loans: + $ Deposits: + c. Now suppose that whoever took out the loan in question (b) writes a check for this amount and that the person receiving the check deposits it in Bank Z. Show the effect of these transactions on the balance sheet of Bank Y and Bank Z, after the check has been cleared. On the T-account for Bank Y, include the transactions from questions (a) and (b). Bank Y Assets Liabilities Reserves: + $ Deposits: + Loans: + $ Bank Z Assets Liabilities Reserves: + $ Deposits: + d. What is the maximum increase in checking account deposits that can result from your $100000 deposit? What is the maximum increase in the money supply? https://moodle.tedu.edu.tr/mod/quiz/attempt.php? attempt=64126&cmid=127530 2/3