This questions guides you through the concept of the money multiplier. Suppose banks have a reserve requirement of 10%. That is, for every dollar of extra deposit a bank receives, it can (and will) lend out 90 cents. As explained in class, money lent out will create more deposits, creating a money multiplier effect. (a) Suppose bank 1 receives an additional $100 of deposits. How many additional dollars of loans are created by bank 1? (b) Now, suppose the loan made by bank 1 became deposits at bank 2, which will makes more loans. How many additional dollars of loans are created by bank 1 and 2 combined? (c) (Involves math not covered in class) Suppose this process goes on forever, to bank 3, bank 4, and ... bank o infinity). How many additional dollars of loans are created by this infinite chain of banks? Hint: the formula for the sum of an infinite geometric series is give below. If confusing, please search online. 1+r+m2+ 3+ ..., 1-r