Assume that the following data describe the current condition of the commercial banking system: ValueTotal reserves:$ 100 billionTransactions deposits:$ 800 billionCash held by public:$ 300 billionRequired reserve ratio:0.10Instructions: Enter your responses as a whole number. In part b, round your response to one decimal place.How large is the money supply (M1)?$ _____ billionHow large are excess reserves?$ _____ billionNow assume that the public transfers $50 billion in cash into transactions accounts. 3. How much would the total lending capacity of the banking system be after this portfolio switch?$ ____ billionHow large would the money supply be if the banks fully utilized their lending capacity?$ ____ billion

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Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter27: Money And Banking

Section: Chapter Questions

Problem 31P: Humongous Bank is the only bank in the economy. The people in this economy have 20 million in money,...

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Assume that the following data describe the current condition of the commercial banking system:

	Value
Total reserves:	$ 100 billion
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.

How large is the money supply (M1)?
$ _____ billion
How large are excess reserves?
$ _____ billion

Now assume that the public transfers $50 billion in cash into transactions accounts.

3. How much would the total lending capacity of the banking system be after this portfolio switch?
$ ____ billion
How large would the money supply be if the banks fully utilized their lending capacity?
$ ____ billion

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Assume that the following data describe the current condition of the commercial banking system:

	Value
Total reserves:	$ 100 billion
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.

How large would the money supply be if the banks fully utilized their lending capacity?
$ ____ billion

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