Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 20%. Charles, a Southeast Mutual Bank customer, deposits $1,500,000 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 (Dollars) 1,500,000 Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves (Dollars) Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Ana, who immediately uses the funds to write a check to Yakov. Yak deposits the funds immediately into his checking account at Walls Fergo Bank. Then Walls Fergo Bank lends out all of its new excess reserves to Gilberto, who writes a check to Dina, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves t Juanita in turn.
Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at 20%. Charles, a Southeast Mutual Bank customer, deposits $1,500,000 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 (Dollars) 1,500,000 Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves (Dollars) Change in Required Reserves (Dollars) Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Ana, who immediately uses the funds to write a check to Yakov. Yak deposits the funds immediately into his checking account at Walls Fergo Bank. Then Walls Fergo Bank lends out all of its new excess reserves to Gilberto, who writes a check to Dina, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves t Juanita in turn.
Chapter12: Money And The Banking System
Section: Chapter Questions
Problem 3TY
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Transcribed Image Text:Suppose Southeast Mutual Bank, Walls Fergo Bank, and PJMorton Bank all have zero excess reserves. The required reserve ratio is presently set at
20%. Charles, a Southeast Mutual Bank customer, deposits $1,500,000 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
Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20%.
Hint: If the change is negative, be sure to enter the value as negative number.
Amount Deposited Change in Excess Reserves
(Dollars)
(Dollars)
1,500,000
Liabilities
Change in Required Reserves
(Dollars)
Now, suppose Southeast Mutual Bank loans out all of its new excess reserves to Ana, who immediately uses the funds to write a check to Yakov. Yakov
deposits the funds immediately into his checking account at Walls Fergo Bank. Then Walls Fergo Bank lends out all of its new excess reserves to
Gilberto, who writes a check to Dina, who deposits the money into her account at PJMorton Bank. PJMorton lends out all of its new excess reserves to
Juanita 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.
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