Suppose that a lottery winner deposits $12 million in cash into her transactions account at the Bank of America (B of A). Assume a reserve requirement of 20 percent, no loans, and no excess reserves in the banking system prior to this deposit. 

(a) Use step 1 in the following T-accounts to show how her deposit affects the balance sheet at B of A. 

(b) Has the money supply been changed by her deposit? 

(c) Use step 2 here to show the changes at B of A after the bank fully uses its new lending capacity. 

(d) Has the money supply been changed in step 2? 

(e) In step 3 the new borrower(s) writes a check for the amount of the loan in step 2. That check is deposited at another bank, and B of A pays the other bank when the check clears. What does the B of A balance sheet look like now? 

(f) After the entire banking system uses the lending capacity of the initial ($12 million) deposit, by how much will the following have changed? 

Total reserves  

Total deposits 

Total loans 

Cash held by public 

The money supply