ECON EXAM -ACTUAL EXAM- LATEST VERSION -QUESTIONS AND ANSWERS

ECON EXAM [ACTUAL EXAM] LATEST VERSION [QUESTIONS
AND ANSWERS] DETAILED AND VERIFIED FOR
GUARANTEED PASS- LATEST UPDATE 2025 GRADED A
(BRAND NEW!!)




Now, suppose First Main Street Bank loans out all of its new excess
reserves to Eileen, who immediately uses the funds to write a check
to Clancy. Clancy 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 Manuel, who writes a check to
Kate, who deposits the money into her account at Third Fidelity Bank.
Third Fidelity lends out all of its new excess reserves to Poornima 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. -
CORRECT ANSWER Increase in Deposits
Increase in Required Reserves
Increase in Loans

First Main Street Bank: 1,500,000 300,000 1,200,000
Second Republic Bank: 1,200,000 240,000 960,000
Third Fidelity Bank: 960,000 192,000 768,000

Explanation:
You already found that of the $1,500,000 initial deposit, 20% (or
$300,000) had to be held as required reserves and the remaining 80%
(or $1,200,000) could be loaned out.
If you follow that $1,200,000 loan, you can see that when it is
deposited into Second Republic Bank, 20% of that $1,200,000 must be
held as required reserves by Second Republic Bank and the
remaining 80% can be loaned out:
Increase in Second Republic Bank's Required Reserves =
0.20×$1,200,000