Suppose the banking system has a vault cash of GHc1,000 deposit at the central bank of GHc2,000 and demand deposits of Ghc10,000. a. if the reserve requirement is 20 percent, what is the maximum potential increase in the money supply given the banks reserve position? b. If the central bank now purchases GHc500 worth of government bonds from private bond dealers, what are excess reserves of the banking system? ( Assume that the bond dealers deposit the Ghc500 in demand deposit). How much can the banking system increase the money supply given the new reserve position?

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