Total Reserves: $80 Billion Transaction Deposits: $800 Billion Cash Held By Publ
ID: 1232193 • Letter: T
Question
Total Reserves: $80 BillionTransaction Deposits: $800 Billion
Cash Held By Public: $100 Billion
Reserve Requirement: .10
A)How large is the money supply (M1)?
B).Are the banks fully utilizing their lending capacity? Explain.
Banks(are/are not) utilizing their lending capacity because their total reserves are(equal/less/greater than) their reserve requirement of $_______ billion
C)What would the lending capacity of the banking system be after such a portfolio switch?
D)How large would the money supply be if the banks fully utilized their lending capacity?
Explanation / Answer
A) M1= 800+100=900 Billion B) Since the loan amount is not provided, not possible to answer this question. C) Full lending capacity would lead to loans of 800/.1=8000 Billion. D) Money supply under such circumstances = 8000+100=$8100 Billion