What is the largest possible money supply

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The Gorgonzolan central bank puts 5,000,000 guilders into circulation and each of the commercial banks holds 20% of deposits. Assume the public holds no currency.

a. Initially all of the money is deposited into First National Bank. Show the T-account for First National Bank.

b. The loans from First National Bank are deposited into Second National Bank. Show the T-account for Second National Bank.

c. What is the largest possible money supply?

Reference no: EM131169603

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