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Basic Question 2 of 13
Your parents give you a check for $200, which you deposit in your account. The reserve requirement is 20%. What is the change in the money supply?
B. $200
C. $800
A. $0
B. $200
C. $800
User Contributed Comments 6
| User | Comment |
|---|---|
| AlexYuen | for $SS to increase, there must be new inputs to the banking system. left pocket pays right pocket does not create new $. |
| cahiz84 | checks and credit cards are not money |
| neenalisa | will the money supply increase if my parents gave me cash of $200 instead of a check? |
| geofin | Only if they took a loan. Borrowing creates new money. |
| xp_acctant | @ geofin - very correct. Loan is key in answering the question. |
| khalifa92 | good point |
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Learning Outcome Statements
describe tools used to implement monetary policy tools and the monetary transmission mechanism, and explain the relationships between monetary policy and economic growth, inflation, interest, and exchange rates
CFA® 2024 Level I Curriculum, Volume 1, Module 4.