Money and Banking Assume that Richie Rich has $5,500 in his…
Money and Banking Assume that Richie Rich has $5,500 in his checking account at Jackson Bank and uses his checking account debit card to withdraw $500 in cash from the bank’s ATM machine. 1. By what dollar amount did the M1 money supply change as a result of Richie’s single isolated transaction? (3) 2. What if anything changed from the reserve amount that Jackson Bank has to hold as a result of Richie’s withdrawal? (3) 3. More generally, what would happen if every depositor at Jackson bank decided to withdraw a significant amount of cash from their accounts at Jackson Bank? Explain in terms of how a fractional banking system works.(5) 4. What is one way to protect depositors’ account and keep banks from failing? (4)