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?