If the required reserve ratio is 15 percent,there is no currency drain,and banks loan all of their excess reserves,an increase in the monetary base of $20,000 leads to a total increase in the quantity of money of
A)$3,000.
B)$20,000.
C)$133,333.
D)$200,000.
E)$300,000.

Question

Quizplus · Accepted Answer

The money multiplier is 1/required reserve ratio, which is 1/0.15 = 6.67. The total increase in the quantity of money is the monetary base increase multiplied by the money multiplier: $20,000 * 6.67 = $133,333.

If the Required Reserve Ratio Is 15 Percent,there Is No