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Please help me to solve d and e. Thank you! Assume that the following data describe the current condition of the commercial banking system: Value

Please help me to solve d and e. Thank you!image text in transcribed

Assume that the following data describe the current condition of the commercial banking system: Value Total reserves: $40 billion Transactions deposits: $750 billion Cash held by public: $450 billion Required reserve ratio: 0.05 a. How large is the money supply (M1)? S 1,200 billion b. Are the banks fully utilizing their lending capacity? billion in excess Banks currently have s 2.5 reserves. Now assume that the public deposited another $10 billion in cash in transactions accounts. c. What would happen to the money supply initially (before any lending takes place)? Assuming the $10 billion in cash is not new money in the system, M1 will not change 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 the potential growth in M1? Increase reserve requirements the discount rate Increase

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