14-02 algo Assume that the following data describe the current condition of the commercial banking system: Value Total reserves: $60 billion Transactions deposits: $400 billion Cash held by public: $350 billion Required reserve ratio: 0.10 a. How large is the money supply (M1)? b. Are the banks fully utilizing their lending capacity? Banks currently have Now assume that the public deposited another $20 billion in cash in transactions accounts. 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 billion billion in excess reserves. d. How much would the total lending capacity of the banking system be after this portfolio switch? billion e. How large would the money supply be if the banks fully utilized their lending capacity? billion