Instructions: Enter your responses as a whole number. Total reserves $200 billion Transactions $800 billion deposits Cash held by public $700 billion Reserve 0.10 requirement a. How large is the money supply (M1)? billion b. How large are required reserves? billion c. How large are excess reserves? billiond. What is the money multiplier? e. How much is the unused lending capacity? billionTotal reserves $60 billion Transactions $600 billion deposits Cash held by public $200 billion Reserve 0.1 requirement Instructions: Enter your responses rounded to the nearest whole number. a. Are the banks fully utilizing their lending capacity? Yes No b. What would happen to the money supply initially if the public deposited $20 billion of cash in transactions accounts? More information is needed Decrease by $20 billion No change Increase by $20 billionc. What would the lending capacity of the banking system be after this deposit? billion d. How large would the money supply be if the banks fully utilized their lending capacity? billion e. What three policy tools could the Fed use to offset that potential growth in M1? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. ? Lower the discount rate ? Conduct open market sales ? Lower the reserve ? Raise the discount rate requirement ? ? Raise the reserve Conduct open market requirement purchasesThe federal funds rate is the interest rate charged when Multiple Choice O The Fed lends to banks. O One bank lends reserves to another bank. O Individual banks lend to the Fed. O The Fed lends to individuals.By raising and lowering the discount rate, the Fed changes the Multiple Choice O Incentive for banks to borrow reserves. O Money multiplier. O Incentive for banks to buy common stock. O Level of required reserves held by individuals.If the Fed wishes to increase the money supply, it could Multiple Choice O Issue more bonds. O Raise the minimum reserve ratio. O Sell securities on the open market. O Lower the discount rate.Which of the following services is performed by the regional Federal Reserve banks? Multiple Choice O Determining open market operations. O Issuing government bonds. O Holding bank reserves. O Bailing out or liquidating failed banks.If the Fed buys $150 billion of U.S. bonds in the open market and the reserve requirement is 5 percent, M1 will eventually Multiple Choice O Increase by $3,000 billion. O Decrease by $3,000 billion. O Increase by $300 billion. O Decrease by $300 billion.All of the following are tools available to the Fed for controlling the money supply except Multiple Choice O Taxes. O The discount rate. O The reserve requirement. O Open market operations.When the Fed buys bonds from the public, it Multiple Choice O Decreases the money supply. O Increases the flow of reserves to the banking system. O Decreases the flow of reserves to the banking system. O Decreases the discount rate.A growing economy needs a Multiple Choice O Continually decreasing supply of money to finance the government's expenditures. O Constant supply of money to keep inflation under control. O Steadily increasing supply of money to finance market exchanges. O Decreasing supply of money to keep interest rates low.Which of the following represents the lending capacity of an entire banking system? Multiple Choice O (Total reserves - required reserves) xmoney multiplier. O Total reserves - required reserves. O Required reserve ratio xtotal deposits. O 1 : (required reserve ratio).Discounting refers to the Fed's practice of Multiple Choice O Lending at the prime rate. O Selling securities at the federal funds rate. O Purchasing securities at the lowest available federal funds rate. O Lending reserves directly to private banks