Suppose r is the desired reserve-deposit ratio (R/D)and the money supply (M)consists of currency (C)and bank deposits (D).Then,the money supply (M)will equal
A) C + R/r.
B) D + R/r.
C) R + C/r.
D) C - R/r.
E) C x R/r.

Question

Quizplus · Accepted Answer

The money supply (M) is the sum of currency (C) and bank deposits (D), and the reserve-deposit ratio (r) is used to determine the reserves (R) held by banks. The correct formula for money supply is M = C + D, and given the reserve-deposit ratio, the deposits can be expressed as D = R/r. Therefore, the money supply can be expressed as M = C + R/r.

Suppose R Is the Desired Reserve-Deposit Ratio (R/D)and the Money