The purpose of this exercise is to illustrate the multiple expansion of bank deposits in a fractional-reserve banking system. Assume the Fed's legal reserve requirement is 20%.

The consolidated balance sheet of the U.S. banking system indicates:

AssetsLiabilities

Reserves$30,000Checkable deposits$100,000

MUST SHOW FORMULA AND CACULATIONS FOR 6a - c AND 7a - c.

a.The simple money multiplier equals _______________.Formula:

b.The banking system has excess reserves of $_______________.

c. Loans and the money supply can be expanded by a maximum of $_______________.