Warm up to the next question. Suppose that a bank is starting from scratch and has no reserves, has made no loans, and has no checking deposits. Thus, both the asset and liability sides of the balance sheet are zero. Furthermore, this is the only bank in town. Jack has 5100 in his pocket, and the reserve requirement is 20%. Recall, M0 = Cash\" + Reserves [\"Monetary Base\"] M1 = Total Deposits + Cash\" [\"Money Su pply\"] *held by the public a. Jack deposits the $100 in his pocket. Writedown the bank's balance sheet after this deposit. What is M0 and M1? What is M1? b. Assume that the bank decides to hold the minimum amount of reserves, and loans out the rest to another resident in town, Karly. Write down the bank's balance sheet after this deposit. What is M0 and M1? How has M0 and M1 changed relative to part (a)? c. Now assume that Karly fully deposits her 580 back into this bank. Write down the bank's balance sheet after this step. What is M0 and M1? d. Continue to assume that any cash gets redeposited back into this bank. Furthermore, the bank always loans out as much as possible, i.e., the bank holds reserves to just satisfy the required reserve ratio. What would the bank's balance sheet look like, after successive iterations of loans and deposits back into this bank? [Hint: Reserves will reach 100, and Total Deposits = 100 + 80 + 64 +... = 1/R] What is M0 and M1? The balance sheet you write below represents the maximum amount of M1 when Jake deposits his $100. [The bank is "fully loaned up", as it is holding zero excess reserves]