1. Use a balance sheet to show the potential increase of the money supply which the bank could produce. (5)

a) and b) are already done

1. A chartered bank has $1 million in deposits and $40,000 in required reserves. Its excess reserves are initially zero. 3. Determine the bank's reserve ratio. (1) b. If an additional $100,000 is deposited in the bank, determine the consequent increases in both its required reserves and excess reserves. (4) c. Use a balance sheet to show the potential increase of the money supply which the bank could produce