Problems 1. Suppose that Springfield National Bank has reserves totaling $100,000 on $1,000,000 of deposits. The reserve requirement is 10 percent. Can this bank make any new loans? Explain.

2. Suppose that Jeff Ankrom, fearing an impending financial crisis, withdraws $20,000 from his account at Springfield National Bank and buries the cash in his backyard. By how much will the bank have to reduce its loans? Calculate the maximum amount the money supply may contract as a result. Show your work