Suppose the total reserves (RR+ER) in the banking sector is $5 trillion. The central bank has set the required reserve ratio (rr) at 5%. Assuming that the banks prefer to hold zero excess reserves (ER), answer the following questions. a. Calculate the money multiplier. b. What is the total money supply at the end of the deposit expansion process? c. Calculate what would happen to the money supply if the central bank causes the total reserves to increase by $1 trillion.

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