What would happen to the money supply initially if the public deposited another $50 billion in cash in transactions accounts?
What would happen to the money supply initially if the public deposited another $50 billion in cash in transactions accounts? Explain. What would the lending capacity of the banking system be after such a portfolio switch? How large would the money supply be if the banks fully utilized their lending capacity? What three steps could the Fed take to offset the potential growth in M1? A. b. The money supply (M1) is $900 billion ($100 cash plus $800 Transactions Deposits).
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