Suppose that the only deposits requiring reserves are checkable deposits (D), that the reserve requirement on deposits (rr) is 10 percent, and that the public always holds 40 percent as much currency as they hold in checkable deposits.

a.If high-powered money (B) equals $100 billion, what is the level of M₁?

b.If high-powered money is increased by $50 billion (so B = $50b), by how much does M₁ change?By how much do checkable deposits change (D)?