Suppose you found Rs. 2000 that was stored under your grandmother's mattress and you decided to deposit this money in a Bank of India. If the desired reserve ratio were 20 percent and all excess...

Suppose you found Rs. 2000 that was stored under your grandmother's mattress and you decided to deposit this money in a Bank of India. If the desired reserve ratio were 20 percent and all excess reserves were lent out.

a) Calculate the money supply created by this deposition in the economy?
b) Following a new deposit of Rs. 2000, what is the reserve requirement of the commercial bank?
c) Suppose all the banks in the banking system collectively have Rs.20 million in cash reserves and have a desired reserve ratio of 20 percent, the maximum amount of demand deposits the banking system can support is?