Are the banks fully utilizing their lending capacity

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Reference no: EM13801666

Assume the banking system contains the following amounts.

Total reserves $80 billion, Transaction deposits $800 billion, Cash held by public is $100 billion, Reserve requirement .10.

A) Are the banks fully utilizing their lending capacity?--------------

B) What would happen to the money supply initially if the public deposited another $30 billion of cash in transaction accounts? -----------------

C) What would the lending capacity of the banking system be after such a portfolio switch? --------

D) How large would the money supply be if the banks fully utilized their lending capacity? ----------

E) What three steps could the Fed take to offset that potential growth in M1? -------

Reference no: EM13801666

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