The monetary base equals

a. currency in circulation.

b. reserves held by banks.

c. currency in circulation − reserves held by banks.

d. currency in circulation + reserves held by banks.

e. currency in circulation/reserves held by banks.

The required reserve ratio is 5%.

a. If a bank has deposits of $100,000 and holds $10,000 as reserves, how much are its excess reserves? Explain.

b. If a bank holds no excess reserves and it receives a new deposit of $1,000, how much of that $1,000 can the bank lend out and how much is the bank required to add to its reserves? Explain.

c. By how much can an increase in excess reserves of $2,000 change the money supply in a checkable-deposits-only system? Explain.