3. Money Creation (and money related questions) Below are three balance sheets from different banks. With this information answer the questions below. The Bank of Mexifo, has the following balance sheet: Assets Liability Reserves (cash) 4800 Deposits 5000 Loans 200 Total 5000 Total 5000 The Bank of Montana, has the following balance sheet: Assets Liability Reserves (cash) 1800 Deposits 4300 Loans 2500 Total 4300 Total 4300 The Bank of Montana, has the following balance sheet: Assets Liability Reserves (cash) 300 Deposits 4300 Loans 4000 Total 4300 Total 4300 1) For each bank calculate their reserve ratio's 2) If each of these banks has a target reserve ratio of 10%, how many extra loans can they create, assuming people always redeposit their money in the bank. 3) Are there banks, which cannot increase their loans? What should they do in this situation? 4) If these bank have target reserve ratios of 10%, 15% and 20% respectively. If the bank of Canada wanted to increase the supply of money with increasing the loans issues, which bank should it deposits its money in? If it increases money supply by 10000, how much extra loans could be created from this amount, assuming full re deposit. 5) What are the benefits we receive from a fractional-reserve system? 6) What are the potential problems, which could arise from a fractional-reserve system? Why are we not worried about them in Canada?