Assume that Johnson deposits $350 of his currency in his account in the XYZ bank.Later the same day Swanson negotiates a loan for $2,000 at the same bank.In what direction and by what amount has this single transaction changed the supply of money?

Question

Quizplus · Accepted Answer

The supply of money has increased by $2,000 due to Swanson's loan, as this creates new money in the form of credit extended to him by the bank. Johnson's deposit does not affect the supply of money as it merely moves existing currency from one account to another. Therefore, the correct answer is B.

Assume That Johnson Deposits $350 of His Currency in His