Q. Assume that following data describe condition of banking system:
Total Reserves: $200 billion
Transactions Deposits: $800 billion
Cash held by public: $100 billion
Reserve Requirement: 0.20
a) Explain how large is money supply (M1)?
b) Explain how large are required reserves?
c) Explain how large is excess reserves?
d) By Explain how much could banks increase their lending activity?
e) Illustrate what will be total effect on M3 money supply?
f) Explain illustrate what steps can be taken by Fed to reduce M3 money supply in economy