Suppose the monetary base is $300 billion, the money multiplier is 3. By how much must the Fed increase the monetary base to achieve a money supply of $1500 billion?

Question

Quizplus · Accepted Answer

To achieve a money supply of $1500 billion with a money multiplier of 3, the monetary base needs to be $1500 billion / 3 = $500 billion. Since the current monetary base is $300 billion, the Fed must increase the monetary base by $500 billion - $300 billion = $200 billion.

Suppose the Monetary Base Is $300 Billion, the Money Multiplier