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Question #3 Score[ = + 3 Assume a banking system with deposits, currency, and required reserves, but no emess reserves. Suppose you nd 5200 under your mattress and deposit it in a checking account at your local bank, which has no excess reserves. [3 points; I335 points per section} [a] By how much do excess reserves increase after you make the deposit if the reserve requirement equals l? [ Answer: [b] In this rst step, has the money supply, M1, changed? (Hint: have deposits increased? Has currency in the hands of the public decreased? Remember that M1 = currency in hands of public + deposits. [ Answer: {c} Now assume that the money multiplier equals 5 [it's not just 1,111.1, since we allow currency in the model, which chang how we compute the money multiplier; and, no, we did not reyiew the specics!}, what is the maximum amount of new checkable deposits that can be created? [Hint: simply the amount of exoess reserves computed in [a] and multiply this number by the money multiplier.] [ Answer: [d] By how much does the total money supply {M1 = currency + checkable deposits} in the banking syste m increase? {