How much would total lending capacity of the banking system

Reference no: EM132734231

Assuming these numbers from the Federal Reserve Bank, now assume that the public deposited another $15 billion in cash in transactions accounts.

Total reserves: $35 billion
Transactions deposits: $650 billion
Cash held by public: $250 billion
Required reserve ratio: 0.05

Question a. How large would the money supply be if the banks fully utilized their lending capacity?

Question b. How much would the total lending capacity of the banking system be after this portfolio switch?

Reference no: EM132734231

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