Assume that the following data describe the current condition of the commercial banking system: Value $ 100 billion Total reserves: Transactions deposits: $ 800 billion Cash held by public: $300 billion Required reserve ratio: 0.10 Instructions: Enter your responses as a whole number. In part b, round your response to one decimal place. Now assume that the public transfers $50 billion in cash into transactions accounts. How much would the total lending capacity of the banking system be after this portfolio switch? $ How large would the money supply be if the banks fully utilized their lending capacity? billion $ billion
Assume that the following data describe the current condition of the commercial banking system: Value $ 100 billion Total reserves: Transactions deposits: $ 800 billion Cash held by public: $300 billion Required reserve ratio: 0.10 Instructions: Enter your responses as a whole number. In part b, round your response to one decimal place. Now assume that the public transfers $50 billion in cash into transactions accounts. How much would the total lending capacity of the banking system be after this portfolio switch? $ How large would the money supply be if the banks fully utilized their lending capacity? billion $ billion
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Help!!! Please show the work so I can understand
Transcribed Image Text:Assume that the following data describe the
current condition of the commercial
banking system:
Value
$ 100 billion
Total reserves:
Transactions deposits: $ 800 billion
Cash held by public: $300 billion
Required reserve ratio: 0.10
Instructions: Enter your responses as a
whole number. In part b, round your
response to one decimal place.
Now assume that the public transfers
$50 billion in cash into transactions
accounts.
How much would the total lending
capacity of the banking system be
after this portfolio switch?
$
How large would the money supply
be if the banks fully utilized their
lending capacity?
$
billion
billion
Expert Solution
Step 1
Required reserve is the minimum amount every commercial bank needs to keep reserve from all deposits with central bank. here in the case it is .01 or 10%.
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