HW 1 FIN 353 Fractional Reserve Banking 1. Assume Bank A receives $180 in loans from the Fed and the reserve requirement is 9.00%. In the following table write out the money multiplication process. Only write out the money multiplication process until Bank E but calculate the Total as if you continued the multiplication process until reserves hit zero and there is nothing left to lend. Table 1 Deposits Loans Reserves Bank A B D E Total 2. How much actual money is there in the banking system, MO, and how much demand deposits are there in the banking system, M1? How much money was created through lending? 3. What are the pros and cons of fractional reserve banking