Assume that banks lend out all their excess reserves. Currently, the legal reserves that banks must hold equal $11.5 billion. If the Federal Reserve decreases its reserve requirement from 10 percent to 5 percent, then there is potential for the whole banking system to raise the money supply by:

Does the law of diminishing returns apply to capital as well as labor? Explain why or why not

What will be an ideal response?

The money supply M2 includes M1

A. Plus balances in savings accounts, money market mutual funds, and currency in private bank vaults and in the Federal Reserve vaults. B. Plus balances in savings accounts and money market mutual funds. C. Minus balances in savings accounts and money market mutual funds. D. Minus balances in savings accounts, money market mutual funds, and short-term certificates of deposit (six months or less).