If the required reserve ratio is 15 per cent,there is no currency drain,and banks loan all of their excess reserves,an increase in the monetary base of $20,000 leads to a total increase in the quantity of money of
A)$133,333.
B)$20,000.
C)$3,000.
D)$300,000.
E)$200,000.

Question

Quizplus · Accepted Answer

The money multiplier is 1 divided by the reserve ratio, so 1/0.15 = 6.67. Therefore, the total increase in the quantity of money is 6.67 times the increase in the monetary base: $20,000 * 6.67 = $133,333.

If the Required Reserve Ratio Is 15 Per Cent,there Is