Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at25%. Nick, a Southeast Mutual Bank customer, deposits $1,800,000 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).AssetsLiabilitiesComplete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 25%.Hint: If the change is negative, be sure to enter the value as negative number.Amount Deposited(Dollars)1,800,000Change in Excess Reserves(Dollars)Change in Required Reserves(Dollars)Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Latasha, who immediately uses the funds to write a check to Jake.Jake deposits the funds immediately into his checking account at Walls Fergo Bank. Then Walls Fergo Bank lends out all of its new excess reserves toTim, who writes a check to Rosa, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves toAlyssa in turn.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.Southeast Mutual BankWalls Fergo BankPJMorton BankIncrease 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 theseassumptions, the $1,800,000 injection into the money supply results in an overall increase ofin demand deposits.

The required reserve ratio of a bank depicts the minimum amount of deposits a bank must keep as…

Complete the following table to reflect any changes in Southeast Mutual Bank's T-account (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 25%. Hint: If the change is negative, be sure to enter the value as negative number.

Complete the following table to reflect any changes in Southeast Mutual Bank's T-account (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 25%. Hint: If the change is negative, be sure to enter the value as negative number.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter19: Money Creation

Section: Chapter Questions

Problem 7SQ

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Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 25%. Paolo, a Southeast Mutual Bank customer, deposits $1,800,000 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). Deposits Assets (Dollars) 1,800,000 $1,800,000 ▼ Reserves Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 25%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) Southeast Mutual Bank Walls Fergo Bank PJMorton Bank $450,000 Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Lucia, who immediately uses the funds to write a check to Kenji. Kenji deposits the funds…
Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 10%. Eric, a Southeast Mutual Bank customer, deposits $250,000 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 Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 10%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 250,000 Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Cho, who immediately uses the funds to write a check to Bob. Bob deposits the funds immediately into his checking…
Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 5%. Sean, a Southeast Mutual Bank customer, deposits $200,000 into his checking account at the local branch.Change in Required Reserves(Dollars)
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