1. Suppose the T-Account (or bank balance sheet) shown below shows a representative bank (i.e. an average bank) in the banking system in EconoLand. The banking system in EconoLand is closed and there is no leakage of money into internataional markets. Furthermore, suppose the banks are all holding their preferred (or desired) reserve ratio. Representative Bank Balance Sheet in EconoLand Assets Liabilities Reserves $2,500 Demand deposits $7,500 Loans Securities $5,500 $1,100 Debt $800 Total Assets $9,000 Total Liabilities $8,300 Bank Capital $800 (a) (1 points) What is the preferred reserve ratio here (i.e. the reserve ratio the bank currently has)? (b) (2 point) If the Central Bank of EconoLand has a required reserve ratio of 10 percent, how much in excess reserves does the banking system have? If the bank- ing system was to loan out those excess reserves, what is the maximum potential expansion in demand deposits? (c) (3 points) Suppose the banks create loans with the excess reserves, and everyone who gets a loan returns the money back to the banking system. What would the new T-Account look like? (In other words, what does the t-account look like if the maximum potential expansion takes place.) (d) (3 points) What is the leverage ratio from the inital balance sheet? How does the leverage ratio change in part (b)? Would this be a concern if EconoLand is following the Basel III guidlines?