An increase in the volume of discount loans
A)increases the monetary base, but decreases the money supply.
B)decreases the monetary base, but increases the money supply.
C)increases both the monetary base and the money supply.
D)decreases both the monetary base and the money supply.

Question

Quizplus · Accepted Answer

An increase in the volume of discount loans increases the monetary base because it means more reserves are available to banks. This, in turn, allows banks to create more money through lending, thus increasing the money supply.

An Increase in the Volume of Discount Loans