6. Major Bank is the sole supplier of loans in its market area but competes in a na¬ tional market for deposits.

(a) . Why might Major Bank be a monop¬ oly in the (local) loan market but a purely competitive bank in the deposit market?

(b) . Use a diagram to show how Major Bank determines the interest rate it pays on deposits to attract the profit-maximizing level of deposits.

(c) . If Major Bank’s required reserve ratio decreased, what would happen to the in¬

terest rate it pays on deposits? What would happen to the quantity of deposits it attracts? Use a diagram to illustrate your answer.