Pleas help with d. & e. I do not understand what they are asking.

Safari File Edit View History Bookmarks Window Help Nicholas Esprit Q 2 Sat Dec 5 3:36 PM . . . [ ezto.mheducation.com COND+r myFranklin M 4-3: Homework 4 G how does a deposit change the lending capacity o.. *BUSN5620_Week?_PersonalAssignment.docx Assume that the following data describe the current condition of the commercial banking system. Value Total reserves $85 billion Transactions deposits $800 billion Cash held by public $300 billion Required reserve ratio 0.10 a. How large is the money supply (M1)? $ 1,100 billion b. Are the banks fully utilizing their lending capacity? No, because banks currently have $ 5 billion in excess eserves. Now assume that the public deposited another $20 billion in cash in transactions accounts. Page 263 c. What would happen to the money supply initially (before any lending takes place)? Assuming the $20 billion in cash is not new money in the system, M1 will not change A d. How much would the total lending capacity of the banking system : billion be after this portfolio switch? e. How large would the money supply be if the banks fully utilized billion W their lending capacity? f. What three steps could the Fed take to offset the potential growth in M1? Increase eserve requirements Increase the discount rate Sel bonds