2. Suppose there's a new deposit of $50,000 to the Canadian banking system. Assume that all the commercial banks have the target reserve ratio of 4% and the public wants to hold 5% of all money in the form of cash (that is, the cash drain ratio is v = 0.05).

a. What will be the eventual total change in the amount of deposits in the banking system? Show your calculations. (1)

b. What is the eventual total change in the amount of loans? What is the eventual total change in the amount of reserves? Show your calculations. (1)