SCENARIO: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up.

d)

NEW DEPOSIT REQUIRED RESERVE LOANS

Bank no. 1 $100000.00 $5000.00 $95000.00

Bank no. 2 $95000.00 $4750.00 $90250.00

Bank no. 3 $90250.00 $4512.50 $85737.50

Bank no. 4 $85737.50 $4286.87 $81450.63

a) What is the required reserve ratio?

b) What is the money multiplier in this economy?

c) Based on the initial $100,000 deposit, the money supply will, at most, expand to how much?

d) If the required reserve ratio were changed to 10%, total loans of Bank No. 2 will change to