Consider the following simplified balance sheet for a bank. (2 pts.) Assets Liabilities Reserves $1.5 million Loans $8.5 million Deposits 10 million
(a) If the required reserve ratio is 10%, how much in excess reserves does this bank hold?
(b) If the bank makes the maximum amount loan with excess reserves, how much money will be created? (Hint: You may want to use the money multiplier.)