5. Working through a change in the reserve requirement Assume that the following table portrays the balance sheet of First Eastern bank. Assets Liabilities and Net Worth Vault Cash $150,000 Deposits $900,000 Deposits at Fed $250,000 Loans $500,000 Total $900,000 Total $900,000 First Eastern's bank reserves are equal to $ . If First Eastern bank wanted to maintain 0.20 of its assets as reserves against checking deposits, First Eastern' would maintain as reserves. Therefore, it would have $ as additional reserves over and above the desired amount. If First Eastern uses the reserves above the desired level to extend additional loans, the money supply would increase by $ If First Eastern wanted to maintain 0.10 of its assets as reserves against checking deposits, First Eastern' would maintain $ as reserves, additional reserves would be $ and the increase in the money supply would be $ The increase in the money supply will be if First Eastern chooses a desired reserve ratio of 0.10