1-Assume the Bank of Smithville, which is one among many banks in this economy, opens its doors to depositors and receives $100,000 in cash deposits. Assume furthermore that the bank has to abide by a 20% required reserve ratio. Could this bank make a loan in the amount of $90,000? Explain

2- Define the money multiplier and create an example.

3- a. Explain how the Central Bank can increase or decrease the money supply through external infusions. Provide a numerical example and demonstrate it using bank balance sheets.

b. Explain and demonstrate using bank balance sheets what would happen to the money supply if the Central Bank made an open market sale of $2 million worth of securities to a private citizen. Assume that the bank with which the private citizen has an account is all "loaned up", has reserves of $10 million, deposits of $100 million and must follow a required reserve ratio of 10%.

4- Assume the Central Bank must increase the money supply. Explain two ways that it may be able to accomplish this objective.