Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 29 - Part X - The Monetary System - Quick Check Multiple Choice - Page 630: 2

Answer

c. is unchanged, increases

Work Step by Step

The \$100 deposit has no effect on the money supply if the bank keeps the whole deposit in its reserves. If the bank lends part of that \$100, however, that portion of the money will become both a demand deposit and currency. This will increase the money supply.
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