When the monetary base increases by $4 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals
A) 40.0
B) 2.5
C) 0.4
D) none of the above

Question

Quizplus · Accepted Answer

The money multiplier is calculated as the change in the quantity of money divided by the change in the monetary base. Therefore, the money multiplier in this case is 10/4 = 2.5.

When the Monetary Base Increases by $4 Billion, the Quantity