suppose that the t-account for first national bank is as follows: Assets liabilities Reserve $100.000 Deposits $500.000 Loan 400.000

a. if the Fed requires banks to hold 5% of deposits as reserves, how much in excess reserves does First national now hold?

b. assume that all other banks hold only the required amount of reserves. if First national decides to reduce its reserves to only the required amount, by how much would the economy's money supply increase?

c. provide an overview of the scenario. Identify key Issues or problems that may exist.

d. Provide your conclusion of this scenario.

I am particularily interested in 'c'