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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?
A firm is currently operating where the MC of the last unit produced = $84, and the MR of this unit = $70. What would you advise this firm to do?
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