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THE EXHIBIT BELOW SHOWS THREE BANKS, WHICH ARE IN SEQUENTIAL ORDER. THERE IS AN INITIAL MONETARY INJECTION OF $100,000 INTO THE ECONOMY. THIS INJECTION GETS FULLY DEPOSITED INTO THE FIRST NATIONAL BANK. ASSUME THAT THE REQUIRED RESERVE RATIO (SET BY THE FED) IS 15%. Also assume that any loans from the First National Bank get fully deposited into the Second National Bank, and any loans from the Second National Bank get deposited into the Third National Bank FIRST NATIONAL BANK ASSETS RR: LOANS: TOTAL: ASSETS RR LOANS: TOTAL: ASSETS RR: LOANS: TOTAL: LIABILITIES DEPOSITS: $100,000 TOTAL: SECOND NATIONAL BANK LIABILITIES DEPOSITS TOTAL: THIRD NATIONAL BANK LIABILITIES DEPOSITS: TOTAL: Refer to the Exhibit. If the multiplier effect were to function as expected, the predicted final change in GDP is approximately O $500,000 O $115,000 O $1,667,000 O $667,000

THE EXHIBIT BELOW SHOWS THREE BANKS, WHICH ARE IN SEQUENTIAL ORDER. THERE IS AN INITIAL MONETARY INJECTION OF $100,000 INTO THE ECONOMY. THIS INJECTION GETS FULLY DEPOSITED INTO THE FIRST NATIONAL BANK. ASSUME THAT THE REQUIRED RESERVE RATIO (SET BY THE FED) IS 15%. Also assume that any loans from the First National Bank get fully deposited into the Second National Bank, and any loans from the Second National Bank get deposited into the Third National Bank FIRST NATIONAL BANK ASSETS RR: LOANS: TOTAL: ASSETS RR LOANS: TOTAL: ASSETS RR: LOANS: TOTAL: LIABILITIES DEPOSITS: $100,000 TOTAL: SECOND NATIONAL BANK LIABILITIES DEPOSITS TOTAL: THIRD NATIONAL BANK LIABILITIES DEPOSITS: TOTAL: Refer to the Exhibit. If the multiplier effect were to function as expected, the predicted final change in GDP is approximately O $500,000 O $115,000 O $1,667,000 O $667,000

Macroeconomics: Private and Public Choice (MindTap Course List)
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 17CQ
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THE EXHIBIT BELOW SHOWS THREE BANKS, WHICH ARE IN SEQUENTIAL ORDER. THERE IS AN INITIAL MONETARY INJECTION OF $100,000 INTO THE ECONOMY. THIS INJECTION GETS FULLY DEPOSITED INTO THE FIRST NATIONAL BANK. ASSUME THAT THE REQUIRED RESERVE RATIO (SET BY THE FED) IS 15%. Also assume that any loans from the First National Bank get fully deposited into the Second National Bank, and any loans from the Second National Bank get deposited into the Third National Bank. FIRST NATIONAL BANK LIABILITIES DEPOSITS: $100.000 ASSETS RR: LOANS: TOTAL: ASSETS RR LOANS: TOTAL: ASSETS RR: LOANS: TOTAL: TOTAL: SECOND NATIONAL BANK LIABILITIES DEPOSITS: TOTAL: THIRD NATIONAL BANK LIABILITIES DEPOSITS: TOTAL: Refer to the Exhibit. If the multiplier effect were to function as expected, the predicted final change in GDP is approximately O $500,000 O $115,000 O $1,667,000 O $667,000
Transcribed Image Text:THE EXHIBIT BELOW SHOWS THREE BANKS, WHICH ARE IN SEQUENTIAL ORDER. THERE IS AN INITIAL MONETARY INJECTION OF $100,000 INTO THE ECONOMY. THIS INJECTION GETS FULLY DEPOSITED INTO THE FIRST NATIONAL BANK. ASSUME THAT THE REQUIRED RESERVE RATIO (SET BY THE FED) IS 15%. Also assume that any loans from the First National Bank get fully deposited into the Second National Bank, and any loans from the Second National Bank get deposited into the Third National Bank. FIRST NATIONAL BANK LIABILITIES DEPOSITS: $100.000 ASSETS RR: LOANS: TOTAL: ASSETS RR LOANS: TOTAL: ASSETS RR: LOANS: TOTAL: TOTAL: SECOND NATIONAL BANK LIABILITIES DEPOSITS: TOTAL: THIRD NATIONAL BANK LIABILITIES DEPOSITS: TOTAL: Refer to the Exhibit. If the multiplier effect were to function as expected, the predicted final change in GDP is approximately O $500,000 O $115,000 O $1,667,000 O $667,000
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