1. Why are informal financial markets used in developing countries? Give an example of an informal financial market.
2. First Bank has cash reserves of $200,000, loans of $800,000, and deposits of $1,000,000.
a. Prepare a balance sheet for the bank.
b. If the bank maintains a reserve requirement of 12 percent, what is the largest loan it can make?
c. What is the maximum amount the money supply can be increased as a result of First Bank's new loan?