Let the reserve requirement be 0.25 and let demand deposits exceed currency by a factor of 2. In that case, an increase of $1 billion in the monetary base increases the money supply by
A) $2 billion.
B) $4 billion.
C) $5 billion.
D) $2.5 billion.
E) only $1 billion.

Question

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The Answer of Let the reserve requirement be 0.25 and let demand deposits exceed currency by a factor of 2. In that case, an increase of $1 billion in the monetary base increases the money supply by
A) $2 billion.
B) $4 billion.
C) $5 billion.
D) $2.5 billion.
E) only $1 billion.

Let the Reserve Requirement Be 0