EconomicsTotal reserves: $80 billionTransactions deposits: $700 billionCash held by public: $300 billionReserve requirement: 0.1 E) How large would the money supply be if the banks fully utilized their lending capacity? The money supply will fall to/ rise to $ __ billion F) What three steps could the fed take to offset that potential growth in M1?Raise the discount rate, raise the reserve requirement, and buy bonds in the open marketLower the discount rate, lower the reserve requirement, and buy bonds in the open marketRaise the discount rate, raise the reserve requirement, and sell bonds in the open marketRaise the federal funds rate, lower the reserve requirement, and sell bonds in the open market

Money supply implies the total amount of money circulating within an economy at a given time. It…

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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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Economics

Total reserves: $80 billion

Transactions deposits: $700 billion

Cash held by public: $300 billion

Reserve requirement: 0.1

E) How large would the money supply be if the banks fully utilized their lending capacity? The money supply will fall to/ rise to $ __ billion

F) What three steps could the fed take to offset that potential growth in M1?

Raise the discount rate, raise the reserve requirement, and buy bonds in the open market
Lower the discount rate, lower the reserve requirement, and buy bonds in the open market
Raise the discount rate, raise the reserve requirement, and sell bonds in the open market
Raise the federal funds rate, lower the reserve requirement, and sell bonds in the open market

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