If currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and bank deposits equal $500 billion, then the money supply equals:
A) $100 billion.
B) $150 billion.
C) $600 billion.
D) $650 billion.

Question

Quizplus · Accepted Answer

The money supply includes currency held by the public, plus bank deposits. Therefore, the money supply is equal to $100 billion (currency held by the public) + $500 billion (bank deposits) = $600 billion. The amount of reserves held by banks does not directly affect the money supply.

If Currency Held by the Public Equals $100 Billion, Reserves