Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 5%. Manuel, a Southeast Mutual Bank customer, deposits $200,000 into his checking account at the local branch. Complete the following table to reflect any changes in Southeast Mutual Bank's T-account (before the bank makes any new loans). Assets Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 5%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves (Dollars) (Dollars) 200,000 Liabilities Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Kate, who immediately uses the funds to write a check to Hubert. Hubert 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 Shen, who writes a check to Poornima, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves to Valerie in turn. Southeast Mutual Bank Walls Fergo Bank PJMorton Bank 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) Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $200,000 injection into the money supply results in an overall increase of in demand deposits.
Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 5%. Manuel, a Southeast Mutual Bank customer, deposits $200,000 into his checking account at the local branch. Complete the following table to reflect any changes in Southeast Mutual Bank's T-account (before the bank makes any new loans). Assets Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 5%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves (Dollars) (Dollars) 200,000 Liabilities Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Kate, who immediately uses the funds to write a check to Hubert. Hubert 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 Shen, who writes a check to Poornima, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves to Valerie in turn. Southeast Mutual Bank Walls Fergo Bank PJMorton Bank 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) Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $200,000 injection into the money supply results in an overall increase of in demand deposits.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at
5%. Manuel, a Southeast Mutual Bank customer, deposits $200,000 into his checking account at the local branch.
Complete the following table to reflect any changes in Southeast Mutual Bank's T-account (before the bank makes any new loans).
Assets
Complete the following table to show the effect of a new deposit excess and required
Hint: If the change is negative, be sure to enter the value as negative number.
Amount Deposited Change in Excess Reserves
(Dollars)
(Dollars)
200,000
Liabilities
Change in Required Reserves
(Dollars)
Southeast Mutual Bank
Walls Fergo Bank
PJMorton Bank
erves when the rec
Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Kate, who immediately uses the funds to write a check to Hubert.
Hubert 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 Shen, who writes a check to Poornima, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess
reserves to Valerie in turn.
reserve ratio is 5%.
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)
Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these
assumptions, the $200,000 injection into the money supply results in an overall increase of
in demand deposits.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education