please answer the questions **Educational Transcript: Banking Chain Reaction****Initial Reserves and Deposits:**- **Deposits (Dollars):** $500,000**Scenario:**First Main Street Bank loans out all of its new excess reserves to Kyoko, who immediately uses the funds to write a check to Jacques. Jacques 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 Sean, who writes a check to Rina, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Yvette in turn.**Task:**Fill in the table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar.**Table Breakdown**1. **Increase in Deposits (Dollars)**2. **Increase in Required Reserves (Dollars)**3. **Increase in Loans (Dollars)**| **Bank** | **Increase in Deposits (Dollars)** | **Increase in Required Reserves (Dollars)** | **Increase in Loans (Dollars)** ||---------------------------|-----------------------------------|---------------------------------------------|---------------------------------|| **First Main Street Bank**| | | || **Second Republic Bank** | | | || **Third Fidelity Bank** | | | |**Conclusion:**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. **6. 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%. Musashi, 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 T-account (before the bank makes any new loans).**T-account:**- **Assets** - [Dropdown Menu] - [Dropdown Menu]- **Liabilities** - [Dropdown Menu] - [Dropdown Menu]**Instructions:**In the given scenario, Musashi's deposit will change the bank's balance sheet. You should calculate the required reserves and the excess reserves based on the deposit and the reserve ratio. Remember, the reserve ratio dictates the funds that must be retained compared to the total deposits, without creating new loans yet. Use this information to populate the changes in assets and liabilities accurately.

Given, Required reserve ratio = RRR= 10% or 0.10 If Musashi deposits the $500,000 into First Main…

6. The money creation process Full-screen Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. Musashi, 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 T-account (before the bank makes any new loans). Assets Liabilities

6. The money creation process Full-screen Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. Musashi, 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 T-account (before the bank makes any new loans). Assets Liabilities

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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please answer the questions

**Educational Transcript: Banking Chain Reaction**

**Initial Reserves and Deposits:**

- **Deposits (Dollars):** $500,000

**Scenario:**
First Main Street Bank loans out all of its new excess reserves to Kyoko, who immediately uses the funds to write a check to Jacques. Jacques 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 Sean, who writes a check to Rina, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Yvette in turn.

**Task:**
Fill in the table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar.

**Table Breakdown**

1. **Increase in Deposits (Dollars)**
2. **Increase in Required Reserves (Dollars)**
3. **Increase in Loans (Dollars)**

| **Bank** | **Increase in Deposits (Dollars)** | **Increase in Required Reserves (Dollars)** | **Increase in Loans (Dollars)** |
|---------------------------|-----------------------------------|---------------------------------------------|---------------------------------|
| **First Main Street Bank**| | | |
| **Second Republic Bank** | | | |
| **Third Fidelity Bank** | | | |

**Conclusion:**
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.

**6. 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%. Musashi, 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 T-account (before the bank makes any new loans).

**T-account:**

- **Assets**
- [Dropdown Menu]
- [Dropdown Menu]

- **Liabilities**
- [Dropdown Menu]
- [Dropdown Menu]

**Instructions:**

In the given scenario, Musashi's deposit will change the bank's balance sheet. You should calculate the required reserves and the excess reserves based on the deposit and the reserve ratio. Remember, the reserve ratio dictates the funds that must be retained compared to the total deposits, without creating new loans yet. Use this information to populate the changes in assets and liabilities accurately.

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