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2. Now that the Wherethehellami branch bank has excess reserves, it can make loans to local entrepreneurs to start small local businesses and to households

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2. Now that the Wherethehellami branch bank has excess reserves, it can make loans to local entrepreneurs to start small local businesses and to households to build proper houses to replace the single- and double-wides that make up a significant portion of the local housing stock. What will the balance sheet of the Wherethehellami branch look like after it fully utilizes is its lending capacity? (Assume there are no other banks for more than 200 miles in any direction, and the Wherethehellami branch can safely utilize its maximum lending capacity). WHERETHEHELLAMI BRANCH, FIFTH NATIONAL BANCH STEP 2: LAST NATIONAL FULLY UTILIZES IT LENDING CAPACITY ASSETS LIABILITIES TOTAL RESERVES DEPOSITS $605 M REQUIRED $ 13 M EXCESS $0 SECURITIES $ 2 M TOTAL LOANS $50 M TOTAL LIABILITIES $ 605 M TOTAL ASSETS 3. Answer the following questions: a. By how much did the money supply increase as a result of the construction company's initial deposit? b. By how much did the initial deposit change Last National's total, required and excess reserves? C. How much did the Wherethehellami branch bank's lending activity add to the increase in the money supply? money multiplier ( 1 / reserve rano) a. $4M ( 1 /. 20) $ 4M ( 5 ) = $ 20 M b TOTAL RESUAVE'S REQUIRED

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