Lending capacity of cash, Microeconomics

Assume the banking system contains:

Total Reserves                         $ 80 billion

Transactions Deposited          $800 billion

Cash held by public                 $100 billion

Reserve Requirement                     0.10

(a)    Are banks fully utilizing their lending capacity?

(b)   What would happen to the money supply initially if the public deposited another $50 billion of cash in transactions accounts?

Posted Date: 3/16/2013 6:23:17 AM | Location : United States

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