Reference no: EM131394197

Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 5%. The Federal Reserve buys a government bond worth $200,000 from Darnell, a client of First Main Street Bank. He deposits the money into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets Liabilities Building and furniture Deposits Loans Net worth Reserves 10,000 $190,000 $200,000 $420,000 Building and furniture 10,000 Deposits 190,000 Loans 200,000 Net worth 420,000 Reserves 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 Change in Required Reserves (Dollars) (Dollars) (Dollars) 200,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Beth, who immediately uses the funds to write a check to Andrew. Andrew 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 Jacques, who writes a check to Eleanor, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Kyoko 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 Increase in Required Reserves Increase in Loans