Problem: Suppose the entire economy contains $5000 worth of one-dollar bills.
(1) If people fail to deposit any of the dollars, but instead hold all $5000 as currency, how large is the money supply?
(2) If people deposit the entire $5000 worth of bills in banks that are required to observe a 100% reserve requirement, how large is the money supply?
(3) If people deposit the entire $5000 worth of bills in banks that are required to observe a 20% reserve requirement, how large is the money supply?
(4) In part (c), what portion of the money supply was created due to banks?
(5) If people deposit the entire $5000 worth of bills in banks that are required to observe a 10% reserve requirement, how large could the money supply become?