Assume that Jane deposits $30,000 in cash into her checking account at ABC Bank and the FED has set a required reserve ratio of 20%.

1. Explain the immediate change (if any) to the M1 measure of the money supply.

2. If ABC Bank holds an additional 10% of her deposit in reserves, calculate the following: the maximum amount the bank will loan out the maximum increase in the money supply as a result of this transaction