You are given the following information for a banking system (including all banks for a country) not an individual bank. The banking system sold stock for $1,500 billion and received initial deposits of $700 billion. Since then, it has acquired property for $200 billion; it holds government bonds of $1,200 billion, and has made loans of $2,000 billion. The reserve requirement is 10%.

a. Suppose the banks in the banking system want to make all possible loans. How many dollars worth of additional loans can the banking system make?

b. Write the balance sheet for the banking system after they make all possible loans.

c. The Federal Reserve wants to reduce the money supply by $500 billion. How much in government bonds should it buy or sell from/to the banking system?

d. Show the banking system balance sheet after the Federal Reserve transaction.