Suppose the banking system holds no excess reserves.
a. What is the maximum amount of check-writing deposits issued by the banking system when reserves total $1,000 and the reserve requirement is (1) 0.20, (2) 0.16, and (3) 0.10?
b. Find the maximum amount of check-writing deposits when the reserve requirement is 0.20 and reserves total (1) $1,000, (2) $1,250, and (3) $2,000.
c. Compare the quantity of check-writing deposits when reserves are held constant and the reserve requirement is lowered in (a) with the quantity of deposits when the amount of reserves held by banks is increased and the reserve requirement remains constant in b.