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

Question

Quizplus · Accepted Answer

The equation for the money supply (M) is M = m*MB. The monetary base (MB) includes both currency (C) held by the public and reserves (R) held by banks. Thus, for the money supply (M) to equal C + D, all the currency (C) held by the public must have been deposited into banks and become part of the money supply (D). Therefore, C + D equals the total quantity of money (M).

If M = the Quantity of Money, M the Money