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Assume the banking system contains the following amounts. Use this information to answer five questions. Total reserves $90 billion Transactions deposits $900 billion Cash held by public $100 billion Reserve requirement 0.10 Instructions: Enter your responses as a whole number. a. Are the banks fully utilizing their lending capacity? O Yes O No b. What would happen to the money supply initially if the public deposited another $20 billion of cash in transactions a O No change Decrease by $20 bllion Increase by $20 billion More information is needed

Assume the banking system contains the following amounts. Use this information to answer five questions. Total reserves $90 billion Transactions deposits $900 billion Cash held by public $100 billion Reserve requirement 0.10 Instructions: Enter your responses as a whole number. a. Are the banks fully utilizing their lending capacity? O Yes O No b. What would happen to the money supply initially if the public deposited another $20 billion of cash in transactions a O No change Decrease by $20 bllion Increase by $20 billion More information is needed

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
Section: Chapter Questions
Problem 2CQQ
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Assume the banking system contains the following amounts. Use this information to answer five questions. Total reserves $90 billion Transactions deposits $900 billion Cash held by public $100 billion Reserve requirement 0.10 Instructions: Enter your responses as a whole number. a. Are the banks fully utilizing their lending capacity? es O Yes O No b. What would happen to the money supply initially if the public deposited another $20 billion of cash in transactions a O No change O Decrease by $20 billion Increase by $20 billion O More information is needed
Transcribed Image Text:Assume the banking system contains the following amounts. Use this information to answer five questions. Total reserves $90 billion Transactions deposits $900 billion Cash held by public $100 billion Reserve requirement 0.10 Instructions: Enter your responses as a whole number. a. Are the banks fully utilizing their lending capacity? es O Yes O No b. What would happen to the money supply initially if the public deposited another $20 billion of cash in transactions a O No change O Decrease by $20 billion Increase by $20 billion O More information is needed
c. What would the lending capacity of the banking system be after this deposit? billion d. How large would the money supply be if the banks fully utilized their lending capacity? billion e. What three policy tools could the Fed use to offset that potential growth in M1? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. Lower the reserve Raise the discount rate requirement Raise the reserve 7 Conduct open market sales requirement Conduct open market purchases Lower the discount rate
Transcribed Image Text:c. What would the lending capacity of the banking system be after this deposit? billion d. How large would the money supply be if the banks fully utilized their lending capacity? billion e. What three policy tools could the Fed use to offset that potential growth in M1? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. Lower the reserve Raise the discount rate requirement Raise the reserve 7 Conduct open market sales requirement Conduct open market purchases Lower the discount rate
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