The money supply consists of Currency + Checkable Deposits (NOT including curren

Question

The money supply consists of Currency + Checkable Deposits (NOT including currency in bank's vaults and NOT including banks' deposits at the Fed). Before the First National Bank made the $90 loan, no one outside the bank held any currency, and Checkable Deposits were equal to 100, so the money supply was equal to 0 + 100 = 100. When the First National Bank made the loan, the borrower received $90 in cash, but checkable deposits did not fall. Thus, the money supply was equal to $ of currency in the hands of the non-bank public plus $ of Deposits, so the money supply was equal to $.

Explanation / Answer

Money supply is $90 cash in hand and $100 in the form of checkable deposits. In this way the money supply in total was $190.

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