Describe the condition of the commercial banking system

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Assume that the following data describe the condition of the commercial banking system: Total Reserve: $80 billion Transaction deposits: $700 billion Cash held by public: $300 billion Reserve required: 0.10 a) How large is the money supply (M1)? b. Are the banks fully utilizing their lending capacity? Explain. c. What would happen to the money supply initially if the public deposited another $20 billion in cash in transactions accounts? Explain. d. What would the lending capacity of the banking system be after such a portfolio switch? e. How large would the money supply be if the banks fully utilized their lending capacity? f. What three steps could the Fed take to offset the potential growth in M1?

Reference no: EM131109462

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