Suppose there are three banks in the economy: Bank A, Bank B and Bank C.? and Cartersville Bank, circa 1900

Suppose there are three banks in the economy: Bank A, Bank B and Bank C.?

They each have a reserve requirement of 10%. Draw the balance sheets for each bank assuming they each have zero deposits, zero required reserves and zero excess reserves. Now, adjust the balance sheets under the following scenario: Allen has a treasury bond that the Fed buys from him for $ 1000. He takes that $ 1000 and deposits it into Bank A. Bank A then loans out as much as it can to Bob, who deposits the loan into Bank B. Bank B then loans out as much as it can to Charlie, who deposits it into Bank C. Indicate the change in M1 from each bank (round to nearest whole number). Assume Bank C keeps a maximum excess reserve.
How much total money (M1) has been created in the economy as a result of the Fed's action?

Can someone one help me? Any help is appreciated!!!


bank best answer:

Answer by simplicitus
http://en.wikipedia.org/wiki/Fractional-reserve_banking#Money_creation

bank

Cartersville Bank, circa 1900


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The Cartersville Bank, located in Cartersville, Cumberland County, Virginia, was built around 1900. It's a very small, 1-story brick structure with slate roof. It has a front gable with returns, and the bargeboard is full, consisting of vertical wood slats that give a scalloped appearance above the windows and door. The front windows are 4/4 sash, and the entrance is a double-leaf wooden door, each with a single long vertical pane. The bank served a very small community and is noticeable for its absence of columns, symbolic of a financial institution's stability. As part of the Cartersville Historic District, it was listed on the National Register of Historic Places, June 10, 1993 #93000505. Cartersville is on a bluff above the James River.

See: www.dhr.virginia.gov/registers/Counties/Cumberland/024-01...

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