Part I $(20$ points$)$

A$.$ According to monetary analysis, show the deposit expansion multiplier to illustrate the potential effect on the nation's money supply

if $$10,000$ of new money is placed on deposit in the banking system with a reserve requirement of $10\%.$ Three levels of deposits are

sufficient, then show totals of each column for an infinite series. Be sure to label the columns.

B$.$ Then show a second deposit expansion multiplier, as in class, using a new reserve requirement of your choosing $($using a different color

if possible$)$ that could be adopted by the Federal Reserve Board $($the FED$)$ in order to fight contraction $($recession$).$ You may construct

this new example over the original illustration or you may use a second, new illustration on the front or back of the page.

C$.$ Thoroughly explain all that happens and the final effect.

A & B$.$ Illustrate deposit expansion multiplier:

$($Show before and after change in the reserve

requirement$)$ Label each column:

Total of columns:

C$.$ Thoroughly explain all that happens & the final effect:

D$.$

What is the new reserve requirement?

$

What is the total potential deposits in the banking system before the change in the reserve requirement:

$

What is the total potential deposits in the banking system after the change in the reserve requirement: