Question

If the monetary base equals $400 billion and the money multiplier equals 2, then the money supply equals:

Group of answer choices
a.$1,000 billion.
b.$400 billion.
c.$800 billion.
d.$200 billion.

Answer 1

The money supply equals $800 billion.

Step-by-step explanation:

To calculate the money supply, we multiply the monetary base by the money multiplier. In this case, the monetary base is $400 billion and the money multiplier is 2.

Money supply = Monetary base * Money multiplier

Money supply = $400 billion * 2 = $800 billion

Therefore, the correct answer is c. $800 billion.