Problem
1. If banks lend 75 percent of their total deposits, explain how the deposit expansion multiplier would be determined. What is its numerical value?
2. Suppose that the money supply is $300 billion and the reserve requirement is 20 percent. An Arab nation suddenly withdraws $5 billion from its bank account in New York and fails to deposit the money elsewhere. To what level could the money supply change?
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.