Suppose That the Money Multiplier Is 3

question 393

Multiple Choice

Suppose that the money multiplier is 3. If the monetary base increases by $1 million, the quantity of money will

• A) decrease by $3 million.
• B) increase by $3 million.
• C) decrease by $300,000.
• D) increase by $300,000.

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Definitions:

Cost of Living

The amount of money needed to sustain a certain standard of living by affording basic expenses such as housing, food, taxes, and healthcare.

Utility Function

A representation in economics of how a consumer ranks different goods or services, based on the level of satisfaction they provide.

Consumption

Consumption involves the use of goods and services by households, constituting one of the primary components of economic activity and a key indicator of economic health.

Income

The monetary payment received for work or through investments, pensions, or subsidies, which is used for consumption and saving.