Assume that the following data describe the condition of the banking system:
Total Reserves: $200 billion
Transactions Deposits: $800 billion
Cash held by the public: $100 billion
Reserve Requirement: 0.20
a) How large is the money supply (M1)?
b) How large are the required reserves?
c) How large are excess reserves?
d) By how much could the banks increase their lending activity?
e) what will be the total effect on the M3 money supply
f) Explain what steps can be taken by the Fed to reduce the M3 money supply in the economy