THE EXHIBIT BELOW SHOWS THREE BANKS, WHICH ARE IN SEQUENTIAL ORDER. THERE IS AN INITIAL MONETARY INJECTION OF $100,000 INTO THE ECONOMY. THIS INJECTION GETS FULLY DEPOSITED INTO THE FIRST NATIONAL BANK. ASSUME THAT THE REQUIRED RESERVE RATIO (SET BY THE FED) IS 15%. Also assume that any loans from the First National Bank get fully deposited into the Second National Bank, and any loans from the Second National Bank get deposited into the Third National Bank FIRST NATIONAL BANK ASSETS RR: LOANS: TOTAL: ASSETS RR LOANS: TOTAL: ASSETS RR: LOANS: TOTAL: LIABILITIES DEPOSITS: $100,000 TOTAL: SECOND NATIONAL BANK LIABILITIES DEPOSITS TOTAL: THIRD NATIONAL BANK LIABILITIES DEPOSITS: TOTAL: Refer to the Exhibit. If the multiplier effect were to function as expected, the predicted final change in GDP is approximately O $500,000 O $115,000 O $1,667,000 O $667,000

THE EXHIBIT BELOW SHOWS THREE BANKS, WHICH ARE IN SEQUENTIAL ORDER. THERE IS AN INITIAL MONETARY INJECTION OF $100,000 INTO THE ECONOMY. THIS INJECTION GETS FULLY DEPOSITED INTO THE FIRST NATIONAL BANK. ASSUME THAT THE REQUIRED RESERVE RATIO (SET BY THE FED) IS 15%. Also assume that any loans from the First National Bank get fully deposited into the Second National Bank, and any loans from the Second National Bank get deposited into the Third National Bank FIRST NATIONAL BANK ASSETS RR: LOANS: TOTAL: ASSETS RR LOANS: TOTAL: ASSETS RR: LOANS: TOTAL: LIABILITIES DEPOSITS: $100,000 TOTAL: SECOND NATIONAL BANK LIABILITIES DEPOSITS TOTAL: THIRD NATIONAL BANK LIABILITIES DEPOSITS: TOTAL: Refer to the Exhibit. If the multiplier effect were to function as expected, the predicted final change in GDP is approximately O $500,000 O $115,000 O $1,667,000 O $667,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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