If M = the quantity of money, m, the money multiplier, MB, the Monetary Base, C = Currency, D = Deposits, R = Reserves, RR = required reserves, and ER = Excess reserves, then C + R would equal:

Question

Quizplus · Accepted Answer

The reserve requirement ratio (RR), which determines the required reserves, is multiplied by deposits (D) to give required reserves (RR x D). Excess reserves (ER) equals reserves (R) minus required reserves (RR x D). The money multiplier (m) is calculated as 1/RR. Therefore, M = m x MB, where MB is the monetary base. Since MB = C + R, then C + R would equal the monetary base (MB) and is the correct answer.

If M = the Quantity of Money, M, the Money