2. Refer to the simplified balance sheet for a bank and answer the following questions.

Assets

Liabilities

Reserves

$10,000

Deposits

$70,000

Loans

$66,000

Stockholder's equity

$6,000

1. If the required reserve ratio is 5%, how much in excess reserves does this bank hold? Show your work.

(Formula) Excess Reserves = Reserves - Required Reserves.

Excess Reserves = $10,000 - $70,000 X 5% = $3,500.then $10,000 - $3,500 = $6,500

***need to make sure this is correct, i saw some use 10% and if they are correct, I don't know why?

1. What is the maximum amount this bank can expand on its loans? Show your work.

this answer is based on the outcome of the previous answer.

1. What will happen to the M1 money supply if it makes the loans under (b) above and those funds are deposited into another bank by the borrowers?

3.Using a-d below, identify and explain each of the following events as: