Question

Suppose again that checkable deposits started off at $400,000 in First Main Street Bank, the required reserve ratio is 15%, with no excess reserves and no cash leakage. First Main Street Bank takes the entire $8,000 in excess reserves that resulted from the open-market purchase by the Fed and creates a loan for Rosa in a form of a new checkable deposit with a balance of $8,000. The money supply now is $ . Then Rosa writes a check for $8,000 to Tim, who immediately deposits the full amount into his checking account at Second Republic Bank.

          Suppose again that checkable deposits started off at $400,000 in First Main Street Bank, the required reserve ratio is 15%, with no excess reserves and no cash leakage.
First Main Street Bank takes the entire $8,000 in excess reserves that resulted from the open-market purchase by the Fed and creates a loan for Rosa in a form of a new checkable deposit with a balance of $8,000.
The money supply now is 
$
.
Then Rosa writes a check for $8,000 to Tim, who immediately deposits the full amount into his checking account at Second Republic Bank.

Added by Meagan D.

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