1. List the three functions of money.

1. Explain what M1 consists of.

1. Suppose Karen transfers $500 from her saving account to her basic checking account. How will this transaction affect M1 and M2?

4. Answer the following questions using the 1st National Bank's balance sheet. See below.

1st National Bank of Kennesaw

ASSETS LIABILITIES

Total Reserves	$50,000	Total Deposits	$400,000
Required Reserves	?
Excess Reserves	$10,000
Loans	?	Net Worth	?
Total	$700,000	Total	$700,000

4-a. Given the balance sheet of 1st National Bank of Kennesaw, how much does the bank have in required reserves?

4-b. Given the balance sheet of 1st National Bank of Kennesaw, what is the required reserve ratio?

4-c. Given the balance sheet of 1st National Bank of Kennesaw, what is the amount of loans?

4-d. Given the balance sheet of 1st National Bank of Kennesaw, what is 1st National Bank's Net Worth?

5. Explain how the Fed's buying of US government securities in the open market will affect the money supply.