Assuming a fully loaned-up banking system and a deposit expansion multiplier of 2, a $10 million government expenditure financed by sales of securities to the banking system will cause the money supply to
A) remain unchanged.
B) rise by $5 million.
C) rise by $10 million.
D) rise by $20 million.

Question

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The Answer of Assuming a fully loaned-up banking system and a deposit expansion multiplier of 2, a $10 million government expenditure financed by sales of securities to the banking system will cause the money supply to
A) remain unchanged.
B) rise by $5 million.
C) rise by $10 million.
D) rise by $20 million.

Assuming a Fully Loaned-Up Banking System and a Deposit Expansion