q.7 Aplia: Econ Into \"Suppose First Main Street Bank, Second Republic Bank, and

Question

q.7 Aplia: Econ

Into "Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. The Federal Reserve buys a government bond worth $500,000 from Rajiv, a client of First Main Street Bank. He deposits the money into his checking account at First Main Street Bank:"

Part A:

Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans).

Assets: Building and furniture, deposits, loans, net worth, reserves) choose all that apply

Liabilities: $50,000 $450,000 $ 500,000 $1,100,000 choose all that apply

Part b: please answer questions in screen shot, the above question was the first question on the screen shot.

Part C:
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.

($500,000) (enter amount) (enter amount)

Part D "Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $500,000 injection into the money supply results in an overall increase of _______ ($500,000 or....$4,500,000 or $5,000,000) in demand deposits."

please answer all econ hw questions...

Assets Llablities 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 (Dollars) 500,000 Change In Excess Reserves (Dollars) Change In Required Reserves (Dollars) Now, suppose First Maln Street Bank loans out all of Its new excess reserves to Maria, who Immediately uses the funds to write a check to Kevin. Kevin deposits the funds immediately into his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Yakov, who wrltes a check to Slmone, who deposits the money Into her account at Third FIdelity Bank. Thlrd Fidellty lends out all of its new excess reserves to Ana 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. Increase in Deposits (Dollars) Increase in Required Reserves (Dollars) Increase in Loans (Dollars) First Main Street Bank Second Republic Bank Third Fidelity Bank

Explanation / Answer

Part -A )

PArt -B )

Part -C)

PArt -D

money supply increase = deposit * money multiplier

money multiplier = 1/ RRR = 1/0.1 = 10

MOney supply = 500000*10 = $5,000,000

Assets Amount Liabilities Amount Reserves $500000 Deposits $500000

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