Use the information below to answer the following questions.
Fact 24.4.2
The Bank of Hobbiton has chosen the following initial balance sheet:

-Refer to Fact 24.4.2. Bilbo Baggins comes to the bank and deposits a $100 bill. After Bilbo's deposit, but before any other actions occur, the total quantity of money in the economy
A)has stayed the same, with its components unchanged.
B)has stayed the same, with currency decreasing and deposits increasing.
C)has fallen, with currency decreasing and deposits staying the same.
D)has risen, with currency unchanged and deposits increasing.
E)has fallen, with currency decreasing and deposits unchanged.

Question

Use the information below to answer the following questions.
Fact 24.4.2
The Bank of Hobbiton has chosen the following initial balance sheet:
 
-Refer to Fact 24.4.2. Bilbo Baggins comes to the bank and deposits a $100 bill. After Bilbo's deposit, but before any other actions occur, the total quantity of money in the economy
A)has stayed the same, with its components unchanged. 
B)has stayed the same, with currency decreasing and deposits increasing. 
C)has fallen, with currency decreasing and deposits staying the same. 
D)has risen, with currency unchanged and deposits increasing. 
E)has fallen, with currency decreasing and deposits unchanged.

Quizplus · Accepted Answer

When Bilbo deposits a $100 bill into the bank, the currency in circulation decreases by $100, but the deposits in the bank increase by $100, keeping the total money supply unchanged.

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