The ABC bank has a deposit base on which it holds excess reserves of $42 Million at a reserve rate that relates to a money multiplier (MM) of 5. On January 2, 2010, Mwen-Mwen, a customer of ABC bank issued a $20 Million check drawn on its account, to Bushrod Manufacturing Company (BMC), which is deposited into its account with Satiah Bank.

(a)The reserve ratio

(b)the initial deposit base prior to the $20 million transactions.

(c)Using the money supply expansion process, determine (i) the maximum amount of creation permissible by the marginal deposit and (ii) the reduction in ABC bank's lending capacity as a result of its total deposits after the $20 million transactions.

(d)The reserve requirement that ABC Bank must take to the Central Bank of Liberia as a result of the $20 Million drawn by its customer, Mwen-Mwen company.

Determine the amount deposit (if any) lost by each of the two banks, and the net loss to the global banking system. Explain the rationale for your answer.