The stock of high-powered money in the economy is $80 billion.The bank reserve-holding ratio is 0.12 and the public wishes to hold 10% of its deposits as cash.The money supply will be approximately
A) $363 billion assuming the 80 billion of high-powered money is held by banks.
B) $400 billion assuming the 80 billion of high-powered money is held by the Fed or in bank vaults.
C) $327 billion assuming the 80 billion of high-powered money is not held by the Fed or in bank vaults.
D) $425 billion assuming the 80 billion of high-powered money is held by banks.
Correct Answer:
Verified
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