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First National Bank Assets Liabilities and Net Worth US Treasury Bonds $450,000 Net Worth $500,000 Reserves (Cash) $175,000 Checkable Deposits $250,000 Loans $125,000 Second National Bank Assets Liabilities and Net Worth US Treasury Bonds $100,000 Net Worth $250,000 Reserves (Cash) $250,000 Checkable Deposits $100,000 Third National Bank Assets Liabilities and Net Worth US Treasury Bonds $900,000 Net Worth $1,000,000 Reserves (Cash) $350,000 Checkable Deposits $500,000 Loans $250,000The Required Reserve Ratio is 25% for all banks. Assuming that all the customers that have outstanding loans have used all of those additional funds to invest in new machinery for their businesses (therefore, the amount of Checkable Deposits is the true liability the bank has to its customers), then $_____________ is the resulting change to the loan creating potential of the whole system (these three banks) as a result of Second National Bank customers depositing an additional $400,000 in their Checkable Deposit accounts in new loans.

First National Bank Assets Liabilities and Net Worth US Treasury Bonds $450,000 Net Worth $500,000 Reserves (Cash) $175,000 Checkable Deposits $250,000 Loans $125,000 Second National Bank Assets Liabilities and Net Worth US Treasury Bonds $100,000 Net Worth $250,000 Reserves (Cash) $250,000 Checkable Deposits $100,000 Third National Bank Assets Liabilities and Net Worth US Treasury Bonds $900,000 Net Worth $1,000,000 Reserves (Cash) $350,000 Checkable Deposits $500,000 Loans $250,000The Required Reserve Ratio is 25% for all banks. Assuming that all the customers that have outstanding loans have used all of those additional funds to invest in new machinery for their businesses (therefore, the amount of Checkable Deposits is the true liability the bank has to its customers), then $_____________ is the resulting change to the loan creating potential of the whole system (these three banks) as a result of Second National Bank customers depositing an additional $400,000 in their Checkable Deposit accounts in new loans.

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter27: Money And Banking
Section: Chapter Questions
Problem 30P: A bank has deposits of 400. It holds reserves of 50. It has purchased government bonds worth 70. It...
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First National Bank Assets Liabilities and Net Worth US Treasury Bonds $450,000 Net Worth $500,000 Reserves (Cash) $175,000 Checkable Deposits $250,000 Loans $125,000 Second National Bank Assets Liabilities and Net Worth US Treasury Bonds $100,000 Net Worth $250,000 Reserves (Cash) $250,000 Checkable Deposits $100,000 Third National Bank Assets Liabilities and Net Worth US Treasury Bonds $900,000 Net Worth $1,000,000 Reserves (Cash) $350,000 Checkable Deposits $500,000 Loans $250,000The Required Reserve Ratio is 25% for all banks.

Assuming that all the customers that have outstanding loans have used all of those additional funds to invest in new machinery for their businesses (therefore, the amount of Checkable Deposits is the true liability the bank has to its customers), then $_____________ is the resulting change to the loan creating potential of the whole system (these three banks) as a result of Second National Bank customers depositing an additional $400,000 in their Checkable Deposit accounts in new loans.

Assets US Treasury Bonds Reserves (Cash) Loans Assets US Treasury Bonds Reserves (Cash) Assets US Treasury Bonds Reserves (Cash) Loans First National Bank $450,000 $175,000 $125,000 Second National Bank $100,000 $250,000 Liabilities and Net Worth Net Worth Checkable Deposits $900,000 $350,000 $250,000 Liabilities and Net Worth Net Worth Checkable Deposits Third National Bank Liabilities and Net Worth Net Worth Checkable Deposits $500,000 $250,000 $250,000 $100,000 $1,000,000 $500,000
Transcribed Image Text:Assets US Treasury Bonds Reserves (Cash) Loans Assets US Treasury Bonds Reserves (Cash) Assets US Treasury Bonds Reserves (Cash) Loans First National Bank $450,000 $175,000 $125,000 Second National Bank $100,000 $250,000 Liabilities and Net Worth Net Worth Checkable Deposits $900,000 $350,000 $250,000 Liabilities and Net Worth Net Worth Checkable Deposits Third National Bank Liabilities and Net Worth Net Worth Checkable Deposits $500,000 $250,000 $250,000 $100,000 $1,000,000 $500,000
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