Use t-account table to show the initial effect

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Suppose you deposit $5000 in currency into your checking account at a branch of Wells Fargo, which we will assume has no excess reserves at the time you make your deposit. Also assume that the required reserves ratio is 25 percent. a) Use a T-account table to show the initial effect of this transaction on Wells Fargo’s balance sheet. b) Suppose that Wells Fargo makes the maximum loan it can make from the funds you deposited. Using a T-account, show the initial effect of granting the loan on Wells Fargo’s balance sheet assuming that the person to whom the loan is granted initially deposits the money in their account at Wells Fargo. Also include on this T-account the transaction from part a). c) What is the maximum increase in checking account deposits that can result from your $5000 deposit? d) What is the maximum increase in money supply? Briefly explain.

Reference no: EM131109604

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