Suppose that the T-account for First National Bank is as follows:

a. If the Fed requires banks to hold 5 percent of deposits as reserves, how much in excess reserves does First National now hold?
b. Assume that all other banks hold only the required amount of reserves. If First National decides to reduce its reserves to only the required amount, by how much would the economy€™s money supplyincrease?

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Assets Liabilities Reserves $100,000 Desis $500,000 Loans 400,000