a. How does the deposit initially change the T-account of the local bank? Use the accompanying chart to illustrate the changes. Answer Bank How does Tracy's deposit change the money supply? The money supply decreases by $500 because there is $500 in currency that is no longer in circulation. The money supply increases by $500. The money in Tracy's sock drawer was not in circulation because it was not actively being used. Depositing that money into a checking account increases checkable deposits by $500, increasing the money supply by that amount. The money supply is unchanged. The money in Tracy's sock drawer was not in circulation because it was not actively being used. Depositing the money in a checking account does not add it to the money supply. The money supply is unchanged. Currency in circulation decreases by $500, but checkable deposits increase by $500. b. If the bank maintains a reserve ratio of 10%, how will it respond to the new deposit? Complete the passage to correctly describe the bank's response. The bank will hold as reserves against the new deposit and make additional loans equal to c. If every time the bank makes a loan, the loan results in a new checkable bank 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 $500? Total money supply expansion: $ d. If every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan and the bank maintains a reserve ratio of 5%, by how much could the money supply expand in response to Tracy's initial cash deposit of $500