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5. 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 10%. Larry, a client of First Main Street Bank, deposits $500,000 into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's Taccount (before the bank makes any new loans). Assets Liabilities Reserves 7 $50,000 V Deposits V $500,000 V Complete the following table to Show the e'ect of a new deposit an excess and required reserves when the required reserve ratio is 10%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 500,000 450,000 50,000 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 reserves to Raphael, who writes a check to Megan, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Susan in turn. Fill in the following table to show the e'ect 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) Second Republic Bank :] :] :l Third Fidelity Bank [:] l:] l:l 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