Assume the following data describe the condition ofthe banking system:Checking deposits $800BCash held by public $100BSavings/CD deposits $1000BCredit card balance $200Ba. How large is the M2?b. If the Fed's reserve requirement is 0.10 then howmuch bank reserve is required in the system?c. How much M2 will increase if banks lend anadditional $1OB?d. With an increase of M2 will likely increase ordecrease the short-term interest rates in the economy?

Answer; a. M2 = $ 1900B b. Required Reserve = $180B c. M2 will increase by amount =…

Answered: Assume the following data describe the…

Assume the following data describe the condition of the banking system: Checking deposits $800B Cash held by public $100B Savings/CD deposits $1000B Credit card balance $200B

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter25: Money, Banking, And The Federal Reserve System

Section: Chapter Questions

Problem 13P

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Question

Assume the following data describe the condition of
the banking system:
Checking deposits $800B
Cash held by public $100B
Savings/CD deposits $1000B
Credit card balance $200B
a. How large is the M2?
b. If the Fed's reserve requirement is 0.10 then how
much bank reserve is required in the system?
c. How much M2 will increase if banks lend an
additional $1OB?
d. With an increase of M2 will likely increase or
decrease the short-term interest rates in the economy?

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