Question: The table below is the combined balance sheet for all the banks in a banking system. Each bank has a target reserve ratio of 5%.

The table below is the combined balance sheet for all the banks in a banking system. Each bank has a target reserve ratio of 5%.

Assets (1) (2) Liabilities / Equity (1) (2)
Reserves $200 $ $ Demand deposits $3,000 $ $
Loans 1,800 Shareholders equity 600
Securities 1,300
Fixed assets 300
Total $3,600 Total $3,600

a. Fill in the blanks in columns (1) reflecting the complete effect of all excess reserves being loaned out. b. The maximum possible increase in the money supply is $ . c. Returning to the original balance sheet, if the target reserve ratio changes to 10%, the quantity of loans the system be forced to call in will be $ . Write in the figures in columns (2) that show this process completed.

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