1. where total deposits between consumers and businesses are the upper limit or maximum money(RRR) is 0.10, and total reserves between all the banks are $1,000. Using the equation, total deposits = $10,000, which is what we found above. How to interpret the mathematics: For every $1 increase in total reserves, the total deposits increase by $10. Another way to say this is for each $1 increase in total reserves, the total deposits will increase by $10, assuming that banks make as many loans as they can and no currency is withdrawn.

Assume that the reserve requirement ratio increases 2 percentage points, what would the total money supply be in this case? Use the same figures provided above.

2. Your friend asks you to lend him/her money. He/she will pay you in a year $1000. If the interest rate you agree on is 5%, how much money would you have to lend him/her today?

3. What is the most interesting thing you learned about monetary policy?explain briefly