11) You are given the following information about the economy of Nocoin:

The banks have deposits of $300 billion. Their reserves are $15 billion, two thirds of which is in deposits with the central bank. Households and firms hold $30 billion in bank notes. There are no coins!

The banks have no excess reserves.

The Bank of Nocoin, the central bank, increases bank reserves by $0.5 billion.

The quantity of money ________.

The change in the quantity of money is not equal to the change in the monetary base because ________.

The money multiplier is ________.

A) increases; when bank reserves increase, banks loan out their excess reserves and a multiplier process ensues; 7.33

B) decreases; money includes currency but the monetary base does not include currency; 7.0

C) decreases; an increase in monetary base brings about a decrease in the quantity of money; 7.33

D) increases; the components of the monetary base are not the components of the quantity of money; 7.0

E) increases; the monetary base includes bank deposits; 7.0

Answer:A