Assets Fill in the blank options (Building and Furniture OR Checkable Desposits OR Loans OR Net Worth OR Reserves) ($450,000 OR $1,350,000 OR $1,800,000 OR $4,500,000) Liabilities fill in the blank options (Building and Furniture OR Checkable Desposits OR Loans OR Net Worth OR Reserves) ($450,000 OR $1,350,000 OR $1,800,000 OR $4,500,000).. in an overall increase of.. fill in the blank options($720,000 OR $5,400,000 OR $7,200,000).. in checkable deposits and a... fill in the blank options($720,000 OR $5,400,000 OR $7,200,000) thank you so much!!! **Title: Understanding the Ripple Effect of Banking Transactions on Money Supply****Description:**The table illustrates the chain reaction of banking transactions, demonstrating how deposits affect checkable deposits, required reserves, and subsequent loans across multiple banks. Follow the instructions to fill in the table, ensuring to round each value to the nearest dollar.---### Banking Transaction Table| Bank Name | Increase in Checkable Deposits ($) | Increase in Required Reserves ($) | Increase in Loans ($) ||--------------------------|------------------------------------|-----------------------------------|-----------------------|| First Main Street Bank | | | || Second Republic Bank | | | || Third Fidelity Bank | | | |---#### Instructions:1. **Fill in the blanks**: Use the effects of the initial deposit and subsequent lending to complete the table.2. **Assumptions**: Assume an ongoing cycle where each loan becomes a new deposit, with banks maintaining only the required reserves and no excess reserves.**Note**: Based on Edison's initial deposit of $1,800,000, calculate the overall increase in checkable deposits and the corresponding rise in the money supply.By following this process, you can observe and calculate the expansion of the money supply caused by the deposit and lending activities in the banking system.--- **Educational Objective:** This exercise provides insight into how initial deposits are magnified in the banking system, illustrating the concept of the money multiplier in action. Understanding this process is crucial for comprehending the broader impacts of banking operations on the economy. ### The Money Creation Process**Scenario:**Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 25%. Edison, a customer of First Main Street Bank, inherits $1,800,000 from his eccentric aunt, who had stored the money in cash in her safe deposit box. He deposits the cash into his checking account at First Main Street Bank.**Instructions:**1. **Balance Sheet:** Complete the table to reflect any changes in First Main Street Bank's balance sheet before any new loans are made. **Assets** | **Liabilities** ---------- | -------------- _________ | _________2. **Reserve Changes:** Complete the table to show the effects of the new deposit on excess and required reserves, assuming a required reserve ratio of 25%. *Hint:* If the change is negative, enter the value as a negative number. | **Amount Deposited (Dollars)** | **Change in Excess Reserves (Dollars)** | **Change in Required Reserves (Dollars)** | | ------------------------------ | --------------------------------------- | ----------------------------------------- | | 1,800,000 | | |3. **Process:** - First Main Street Bank loans out all of its new excess reserves to Crystal, who writes a check to Brian. - Brian then deposits the funds in his checking account at Second Republic Bank. - Second Republic Bank loans out all of its new excess reserves to Kevin, who writes a check to Hilary. - Hilary deposits the money in her account at Third Fidelity Bank. - Finally, Third Fidelity lends out all its new excess reserves to Maria. **Note:** This process illustrates the money creation mechanism through the banking system.

In macroeconomics, a multiplier is an element of proportionality that estimate how much an…

Answered: Assets Fill in the blank options…

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC