Suppose the reserve requirement is 15%, banks hold no excess reserves, and there are no additional currency holdings. For each of the following scenarios, find the change in deposits, reserves, and loans for each bank. Instructions: Round your answers to two decimal places. a. Mickey receives his paycheck of $2,600 for the week and deposits the check at First Bank. Use the table below to show the change In assets and liabilities at First Bank resulting from this transaction. Assets Change in Reserves: $ Change in Loans: $ b. Suppose that Austin gets a loan from First Bank in the amount from the "Loans" cell in the table in part a, and uses it to buy some Jewelry from Jenny. Jenny takes the money from Austin and deposits it at Second Bank. Use the table below to show the change in assets and liabilities at Second Bank resulting from this transaction. Assets Change in Reserves: $ Change in Loans: $ Liabilities Change in Deposits: $ Assets Change in Reserves: $ Change in Loans: $ Liabilities Change in Deposits: $ c. Now suppose that Mary gets a loan from Second Bank in the amount from the "Loans" cell in the table in part b, and purchases a television from Jasper with the money. Jasper takes the money from the sale of the television and deposits It Into Third Bank. Use the table below to show the change in assets and liabilities at Third Bank resulting from this transaction. Liabilities Change in Deposits: $ d. This process continues with each additional change in deposits, reserves, and loans becoming smaller until no more loans can be made. Therefore, the change in money created will be (Click to select) the amount of the initial deposit under fractional reserve banking,
Suppose the reserve requirement is 15%, banks hold no excess reserves, and there are no additional currency holdings. For each of the following scenarios, find the change in deposits, reserves, and loans for each bank. Instructions: Round your answers to two decimal places. a. Mickey receives his paycheck of $2,600 for the week and deposits the check at First Bank. Use the table below to show the change In assets and liabilities at First Bank resulting from this transaction. Assets Change in Reserves: $ Change in Loans: $ b. Suppose that Austin gets a loan from First Bank in the amount from the "Loans" cell in the table in part a, and uses it to buy some Jewelry from Jenny. Jenny takes the money from Austin and deposits it at Second Bank. Use the table below to show the change in assets and liabilities at Second Bank resulting from this transaction. Assets Change in Reserves: $ Change in Loans: $ Liabilities Change in Deposits: $ Assets Change in Reserves: $ Change in Loans: $ Liabilities Change in Deposits: $ c. Now suppose that Mary gets a loan from Second Bank in the amount from the "Loans" cell in the table in part b, and purchases a television from Jasper with the money. Jasper takes the money from the sale of the television and deposits It Into Third Bank. Use the table below to show the change in assets and liabilities at Third Bank resulting from this transaction. Liabilities Change in Deposits: $ d. This process continues with each additional change in deposits, reserves, and loans becoming smaller until no more loans can be made. Therefore, the change in money created will be (Click to select) the amount of the initial deposit under fractional reserve banking,
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose the reserve requirement is 15%, banks hold no excess reserves, and there are no additional currency holdings. For each of
the following scenarlos, find the change in deposits, reserves, and loans for each bank.
Instructions: Round your answers to two decimal places.
a. Mickey receives his paycheck of $2,600 for the week and deposits the check at First Bank. Use the table below to show the change
In assets and liabilities at First Bank resulting from this transaction
Assets
Change in Reserves: $
Change in Loans: $
b. Suppose that Austin gets a loan from First Bank in the amount from the "Loans" cell in the table in part a, and uses it to buy some
Jewelry from Jenny. Jenny takes the money from Austin and deposits It at Second Bank. Use the table below to show the change in
assets and liabilities at Second Bank resulting from this transaction.
Assets
Change in Reserves: $
Change in Loans: $
Liabilities
Change in Deposits: $
Assets
Change in Reserves: $
Change in Loans: $
Liabilities
Change in Deposits: $
c. Now suppose that Mary gets a loan from Second Bank in the amount from the "Loans" cell in the table in part b, and purchases a
television from Jasper with the money. Jasper takes the money from the sale of the television and deposits It Into Third Bank. Use the
table below to show the change in assets and liabilities at Third Bank resulting from this transaction.
Liabilities
Change in Deposits: $
d. This process continues with each additional change in deposits, reserves, and loans becoming smaller until no more loans can be
made.
Therefore, the change in money created will be (Click to select) the amount of the initial deposit under fractional reserve banking,
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