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1. Suppose Karen transfers $500 from her saving account to her basic checking account. How will this transaction affect M1 and M2 and why? Explain.
2. Answer the following questions using the balance sheet of the 1st National Bank of Georgia. Assume the bank is loaned up.
a. How much does the bank have in required reserves?
b. What is the amount of loans?
c. What is 1st National Bank’s Net Worth?
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