Complete the following table to show the effect of a new deposit on 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 (Dollars) 500,000 Change in Excess Reserves (Dollars) Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Neha, who immediately uses the funds to write a check to Lorenzo. Lorenzo 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 Andrew, who writes a check to Teresa, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves to Beth 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. Southeast Mutual Bank Walls Fergo Bank PJMorton Bank Increase in Deposits Increase in Required Reserves (Dollars) (Dollars) Increase in Loans (Dollars) 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 in demand deposits.
Complete the following table to show the effect of a new deposit on 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 (Dollars) 500,000 Change in Excess Reserves (Dollars) Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Neha, who immediately uses the funds to write a check to Lorenzo. Lorenzo 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 Andrew, who writes a check to Teresa, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves to Beth 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. Southeast Mutual Bank Walls Fergo Bank PJMorton Bank Increase in Deposits Increase in Required Reserves (Dollars) (Dollars) Increase in Loans (Dollars) 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 in demand deposits.
Chapter14: Banking And The Money Supply
Section: Chapter Questions
Problem 3.4P
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Transcribed Image Text:Complete the following table to show the effect of a new deposit on 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
(Dollars)
500,000
Change in Excess Reserves
(Dollars)
Change in Required Reserves
(Dollars)
Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Neha, who immediately uses the funds to write a check to Lorenzo.
Lorenzo 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 Andrew, who writes a check to Teresa, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess
reserves to Beth 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.
Southeast Mutual Bank
Walls Fergo Bank
PJMorton Bank
Increase in Deposits Increase in Required Reserves
(Dollars)
(Dollars)
Increase in Loans
(Dollars)
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
in demand deposits.
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