Let's say the reserve ratio (rD) is 10%, the excess reserve ratio (er) is 5%, and the private cash holding ratio (c) is 5%.

Let's say that FED purchases $100 of government bonds from Onebank, Onebank loans this amount to First Firm, and First Firm deposits it in Bank A. Suppose Bank A lent to the private sector and the private sector deposited in Bank B. Let's also assume that there are infinitely many banks in the banking system and the deposit and loan process is constantly repeated (for example, Bank B, Bank C, Bank D, ...)

a) Describe the transaction activities of central bank, bank A, and bank B in the balance-sheet

b) Find the currency multiplier and explain how the currency fluctuated once the deposit and loan processes were completed

c) Explain why the FED has no complete control over the money supply