a) The Bank of Zambia buys K1 million of bonds from banks, but an additional 10% of any deposits is held as excess reserves. What is the total increase in deposits when the required reserve ratio is 10%? [7 Marks] b) The Bank of Zambia is discussing the possibility of paying interest on excess reserves. If it occurs what will happen to the level of excess reserves to deposits ratio? [7 Marks] c) During the financial and economic crisis of 2007 to 2008, the excess reserves to deposits ratio increased significantly. What do you think happened to the money supply? [6 Marks] [TOTAL: 20 MARKS]