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Fact 8.4.2
The Bank of Hobbiton has chosen the following initial balance sheet:

-Refer to Fact 8.4.2.Bilbo Baggins comes to the bank and deposits a $100 bill.After Bilbo's deposit, but before any other actions occur, the total quantity of money in the economy
A)has fallen, with currency decreasing and deposits unchanged.
B)has stayed the same, with its components unchanged.
C)has risen, with currency unchanged and deposits increasing.
D)has stayed the same, with currency decreasing and deposits increasing.
E)has fallen, with currency decreasing and deposits staying the same.

Question

Use the information below to answer the following questions.
Fact 8.4.2
The Bank of Hobbiton has chosen the following initial balance sheet:
 
-Refer to Fact 8.4.2.Bilbo Baggins comes to the bank and deposits a $100 bill.After Bilbo's deposit, but before any other actions occur, the total quantity of money in the economy
A)has fallen, with currency decreasing and deposits unchanged. 
B)has stayed the same, with its components unchanged. 
C)has risen, with currency unchanged and deposits increasing. 
D)has stayed the same, with currency decreasing and deposits increasing. 
E)has fallen, with currency decreasing and deposits staying the same.

Quizplus · Accepted Answer

When Bilbo deposits a $100 bill in the bank, the physical currency held by the public decreases by $100, but the amount of deposits in the bank increases by $100. The total quantity of money in the economy remains the same, but its composition changes.

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