If the money multiplier is 3.0, a $1,000 increase in the monetary base
A) increases the quantity of money by $3,000.
B) decreases the quantity of money by $3,000.
C) increases the money multiplier by 3 per cent.
D) decreases the quantity of money by 3 per cent.
E) increases the monetary base by $300.

Question

Quizplus · Accepted Answer

The money multiplier indicates how much the money supply increases for each dollar increase in the monetary base. With a multiplier of 3.0, a $1,000 increase in the monetary base results in a $3,000 increase in the quantity of money.

If the Money Multiplier Is 3