3. Money and Banking:

Tracy deposits $700 cash in a checking account at her local bank.The bank maintains a reserve ratio of 7.5%:

a.If every time the bank makes a loan, the loan results in a new checking deposit in a different bank equal to the amount of the loan, by how much could the total money supply in the economy expand in response to Tracy's initial cash deposit of $700?(3 points)

b.By how much could the total money supply in the economy expand if this time Tracy holds $130 of the $700 in cash with the rest deposited in the bank?(3 points)