Question 5 [12 points] Suppose that Person A deposits $170 (cash) at Bank A. Complete the following questions. Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least two decimal places. a) Suppose Bank A realizes that, on average, its customers only withdraw a portion of their deposits, and so it can lend out some money to other customers. Bank A now chooses the reserve ratio to be 10% or 0.1. Bank A lends out the remaining amount of money as loans to Person B. Record the effect of this transaction on the balance sheet below: Assets Liabilities Reserves = SO Deposits = $0 Loans = $0 b) Person B borrows this money as loans from Bank A and pays to Person C. Suppose Person C deposits this amount with Bank B. Bank B, similar to Bank A, also chooses a reserve ratio of 0.1 and issues the remaining cash as loans to Person D. Record the effect of this transaction on the balance sheet below: Assets Liabilities Reserves = SO Deposits = $0 Loans = $0 c) Person D borrows this money as loans from Bank B and pays to Person E. Suppose Person E deposits this amount with Bank C. Bank C also chooses a reserve ratio of 0.1 and issues the remaining cash as loans to Person F. Record the effect of this transaction on the balance sheet below: Assets Liabilities Reserves = SO Deposits = $0 Loans = $0 d) What is the money multiplier? Use your answer to find the amount of new money supply created. Money multiplier = 0 money created $ 0 Amount of e) Suppose the reserve ratio is now 0.2. If Person A had deposited his $170 now, what would be the amount of money created now? Amount of new money created = $0