Assume the banking system contains the following amounts.
Total reserves $80 billion, Transaction deposits $800 billion, Cash held by public is $100 billion, Reserve requirement .10.
A) Are the banks fully utilizing their lending capacity?--------------
B) What would happen to the money supply initially if the public deposited another $30 billion of cash in transaction accounts? -----------------
C) What would the lending capacity of the banking system 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 could the Fed take to offset that potential growth in M1? -------