Problem
Suppose that a bank with no excess reserves receives a deposit into a checking account of $10,000 in currency. If the required reserve ratio is 10 percent and the public chooses to hold zero cash, what is the maximum increase in the money supply resulting from this deposit?
(a) How would your answer change if there was a decrease in the required reserve ratio?
(b) How would your answer change if there was a decrease in the amount of currency the public chooses to hold?
(c) How would your answer change if there was a decrease in the interest paid on reserves?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.