Assume that households and businesses deposit $10,000 in this bank and that this currency is added to the bank’s reserves. In column (1) show the bank’s balance sheet after this occurs. Is there a change in the money supply? In column (2) show what would happen if the bank now loans all of its excess reserves to a depositor. Is there a change in the money supply?

Suppose the Second National Bank has the following simplified balance sheet. The reserve ratio is 25%.

No, currency has been reduced dollar-for-dollar with the $10,000 increase in check able deposits.Yes, the $7500 excess reserves increase check able deposit money by $7500.