Suppose that the money multiplier is 3.If the monetary base increases by $1 million,the quantity of money will

Question

Quizplus · Accepted Answer

The money multiplier tells us how much the money supply will increase for each dollar increase in the monetary base. In this case, the money multiplier is 3, so for every $1 increase in the monetary base, the money supply will increase by $3. Therefore, if the monetary base increases by $1 million, the quantity of money will increase by $3 million (3 times $1 million).

Suppose That the Money Multiplier Is 3