Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set atKevin, a Southeast Mutual Bank customer, deposits $into his checking account at the local branch.

Complete the following table to reflect any changes in Southeast Mutual Bank\'s Taccount before the bank makes any new loans

Assets Liabilities

Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is

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

Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Hilary, who immediately uses the funds to write a check to Edison. Edison 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 Rajiv, who writes a check to Maria, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves to Simone 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.

Increase in Deposits

Increase in Required Reserves

Increase in Loans

Dollars

Dollars

Dollars

Southeast Mutual Bank

Walls Fergo Bank

PJMorton Bank

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

Answer rating: 100% (QA)

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