Basic Accounting for a bank: Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. The Federal Reserve buys a government bond worth $250,000 from Jack, a client of First Main Street Bank. He deposits the money into his checking account at First Main Street Bank.
Now, suppose First Main Street Bank loans out all of its new excess reserves to Becky, who immediately uses the funds to write a check to Manuel. Manuel 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 Stelios, who writes a check to Kathy, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves as well.
Help me to fill out the attached table to show the effect of this ongoing chain of events at each of the banks. Please enter the answer to the nearest penny.
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