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Assume that the following data describe the current condition of the commercial banking system: Instructions: Enter your responses as a whole number. In part b,
Assume that the following data describe the current condition of the commercial banking system: Instructions: Enter your responses as a whole number. In part b, round your response to one decimal place. a. How large is the money supply (M1)? $ billion b. How large are excess reserves? $ billion Now assume that the public transfers $30 billion in cash into transactions accounts. c. What would happen to the money supply initially (before any lending takes place)? Assuming the $30 billion 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? 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 f. What three steps could the Fed take to offset this potential growth in M1? reserve requirements the discount rate bonds
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