Tom did some house cleaning and happily found $2,000 underneath the sofa. He deposits the full amount into his bank account. Suppose that all commercial banks have a target reserve ratio of 8% and there is no cash drain. The following table shows how deposits, reserves, and loans change as the new deposit permits the banks to create money.

a. This deposit-creation process could go on forever, but it would still have a finite sum. What is the eventual total change in deposits in this case?

b. If the public want to hold 6% of all money in the form of cash (that is, the cash drain ratio is v = 0.06). What will be the eventual total change in the amount of deposits in the banking system? Show your calculations.

c. If the public want to hold 6% of all money in the form of cash (that is, the cash drain ratio is v = 0.06). What is the eventual total change in the amount of loans? What is the eventual total change in the amount of reserves? Show your calculations.