2 6 Assume that the following data describe the current condition of the commercial banking system: points Value Skipped Total reserves $180 billion Transactions deposits $800 billion Cash held by public $300 bill Required reserve ratio 0.20 eBook Print References a How large is the money supply (M1)? b. Are the banks fully utilizing their lending capacity? because banks currently have billion billion in excess reserves Now assume that the public deposited another $20 billion in cash in transactions accounts What would happen to the money supply initially (before any lending takes place)? Assuming the $20 bilion in cash is not new money in the system, M1 will d. How much would the total lending capacity of the banking system be after this portfolio switch? billon How large would the money supply be if the banks fully utilized their Sending capacity? billon What three steps could the Fed take to offset the potential growth in M12 reserve requirements the discount rate bonds