When the nonborrowed monetary base is equal to $200 billion, the borrowed reserves are equal to $100 billion, and the money supply is equal to $700 billion, the money multiplier is ________.

Question

Quizplus · Accepted Answer

The money multiplier is calculated as the money supply divided by the monetary base. Here, the monetary base is the sum of nonborrowed monetary base and borrowed reserves, which is $300 billion. The money supply is $700 billion. Thus, the money multiplier is $700 billion / $300 billion = 2.33.

When the Nonborrowed Monetary Base Is Equal to $200 Billion