1.If the required reserve ratio is 10 percent and a bank has $4 million in demand deposits, how much reserve must the bank keep with the Federal Reserve Bank?

2.Assume the banking system has $300 billion in demand deposits and $30 billion in reserves. In addition, assume that the required reserve ratio is 5 percent. Answer the following questions:

• How much excess reserve is in this system?
• What is the value of the money multiplier?
• What is the maximum amount of change in demand deposit creation that could take place if the banking system lent out all of its excess reserves?