Assume that national savings in the United States increases.

1. Using a correctly labeled loanable funds graph and production possibilities curve, show and explain the impact of the increase in savings on each of the following.
2. interest rates
3. Long-term economic growth for an economy producing capital and consumer goods
4. If the interest rates in the rest of the world remain unchanged, explain the impact of the change you identified in part (a) the international value of the dollar.
5. Based on your answer for part (b), explain what happens to imports and exports in the United States.

Meagan deposits $750 from her piggy bank into her checking account at Regions National Bank. The reserve requirement is 10% and the bank has no excess reserves.

1. What is the immediate effect on the M1 measure of the money supply of her deposit? Explain why.
2. What is the amount of money the local bank can lend?
3. Calculate how much money the entire banking system can create. Show your work.
4. Give two reasons why money creation may not increase by the amount you identified in (c).