If the volume of discount loans increases by $2 billion, the monetary base will increase by
A)$2 billion times the money multiplier.
B)$2 billion divided by the money multiplier.
C)$2 billion.
D)an amount that can be determined only if the ratio of excess reserves to checkable deposits is known.

Question

Quizplus · Accepted Answer

Discount loans directly increase the monetary base by the amount of the loan, in this case, $2 billion, without being initially affected by the money multiplier or reserve ratios.

If the Volume of Discount Loans Increases by $2 Billion