Assume that the following data describe the condition of the commercial banking system: Total Reserves:             $80 billion Transactions deposits:  $800 billion Cash held by public:     $100 billion Reserve requirement:   0.10  (a) How large is the money supply (M1)? (b) How large would the money supply be if the banks fully utilized their lending capacity?

Principles of Economics 2e
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Author:Steven A. Greenlaw; David Shapiro
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Chapter28: Monetary Policy And Bank Regulation
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Problem 14RQ: In a program of deposit insurance as it is operated in the United States, what is being insured and...
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Q11: (10%)

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

Total Reserves:             $80 billion

Transactions deposits:  $800 billion

Cash held by public:     $100 billion

Reserve requirement:   0.10 

(a) How large is the money supply (M1)?

(b) How large would the money supply be if the banks fully utilized their lending capacity?

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