Humongous Bank is the only bank in the economy. The people in this economy have $20 million in money, and they deposit all their money in Humongous Bank.

a. Humongous Bank decides on a policy of holding 100% reserves. Draw a T-account for the bank.

b. Humongous Bank is required to hold 5% of its existing $20 million as reserves, and to loan out the rest. Draw a T-account for the bank after it has made its first round of loans.

c. Assume that Humongous bank is part of a multibank system. How much will money supply increase with that original $19 million loan?