Question

Stacy deposits $1,000 in her checking account. The bank ends up loaning $400 from the $1,000 to another customer, and placing $600 in the bank’s vault. Thus, as a result of Stacey’s deposit and the bank’s actions, the money supply has

Select one:

a. Declined by $400.

b. Declined by $200.

c. Increased by $400.

d. Increased by $200.

Answer 1

now as per the given condition the money that was deposited by stact came back in the economy in form of increased money supply as some amount is further loaned out by bank

so money supply increases by 400

so answer is C