If the money multiplier is 3.0,a $1,000 increase in the monetary base
A)increases quantity of money by $3,000.
B)decreases quantity of money by $3,000.
C)increases the monetary base by $300.
D)increases the money multiplier by 3 percent.
E)decreases the quantity of money by 3 percent.

Question

Quizplus · Accepted Answer

The money multiplier of 3 means that a $1 increase in the monetary base can lead to a $3 increase in the quantity of money. Therefore, a $1,000 increase in the monetary base will result in a $3,000 increase in the quantity of money.

If the Money Multiplier Is 3