Assume the banking system contains the following amounts: Total reserves......................................$90 billion Transactions deposits......................$900 billion Cash held by

Question:

Assume the banking system contains the following amounts:

Total reserves......................................$90 billion

Transactions deposits......................$900 billion

Cash held by public..........................$100 billion

Reserve requirement....................................0.10

(a) Are the banks fully utilizing their lending capacity?

(b) What would happen to the money supply initially if the public deposited another $20 billion of cash in transactions accounts?

(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?

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...