Liabilities:

• Checkable deposite - $200,000
• Owner's Equity - $10,000

Assets:

• Required reserves - 40,000
• Excess reserves - $25,000
• Government bonds - $100,000
• Loans - $30,000
• Building and Fixtures - $15,000

1. Assume that Pam wants to borrow money to pay for a new car from Sharpeland Bank.

• What is the maximum amount that Sharpeland Bank can loan out if it wants to keep all of its bonds?
• What is the maximum amount that the banking system can create given the balance sheet above?

1. Assume instead that Michael withdraws $10,000 in cash from his checking account at Sharpeland.

• By how much will Sharpeland Bank's reserves change based on Michael's withdrawal? (Be specific.)
• What is the immediate effect of the withdrawal on the M1 measure of the money supply? Explain.
• As a result of the withdrawal, what is the new value of excess reserves for Sharpeland Bank based on the reserve requirement from part (a)?