Assume the banking system contains the following amounts: Total reserves $80billion Transactions deposits $800billion Cash held by public $100billion Reserve requirement .10
a)are the banks utilizing their full lending capacity?
b) what would happen to the money supply initially if the public deposited another $30billion of cash in transactions accounts?
c) What would the lending capacity be after such a portfolio switch?
d)How large would the money supply be if the banks fully utilized their lending capacity?
e) what three steps can the fed take to offset the potential growth in M1?
Sidenote: I have completed the other problems for the homework assignment with some ease. However, with this problem, my mind draws a blank. Please help!