TASK 14

Please consider a banking system consisting of a central bank and three commercial banks (Bank A, B and C). The balance sheets of the three commercial banks are presented below. Currency in circulation amounts to 500. Besides loans to the banking sector, the central bank only holds securities as assets. Bank A Liabilities Deposits Borrowings from the central bank 25 200 60 Assets Reserves Securities 85 Loans 200 Bank B Liabilities Deposits Borrowings from the central bank 50 Assets Reserves Securities 200 Loans 500 400 300 Borrowings from Bank A 50 Assets Reserves Securities Loans Bank C Liabilities 20 Deposits 130 Borrowings from the central bank 350 Borrowings from Bank A and B 160 150 100 a) Present the balance sheets of the banking system as a whole and the balance sheet of the central bank. b) Next, determine the size of the monetary base and the size of the money supply (M1)