Multiple Choice
Tony Lai deposits $200 in currency in his checking account at a bank. This deposit is treated as:
A) a subtraction of $200 from the money supply because the $200 in currency is no longer in circulation.
B) an addition of $200 to the money supply because of the creation of a checkable deposit of $200.
C) an addition of $200 to the money supply because the bank holds $200 in currency and the checking account has been increased by $200.
D) no change in the money supply because the $200 in currency has been converted to a $200 increase in checkable deposits.
Correct Answer:
Verified
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