Question: MONEY CREATION PROBLEM - #1 Assume that the following data describe the condition of the banking system: Total Reserves: $400 billion Transactions deposits: $750 billion

MONEY CREATION PROBLEM - #1 Assume that the following data describe the condition of the banking system: Total Reserves: $400 billion Transactions deposits: $750 billion Cash held by public: $250 billion Reserve Requirement: 0.25 1) How large is the money supply (M1)? 2) How large are required reserves? 3) How large are excess reserves? 4) By how much could the banks increase their lending activity

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