Question

Suppose that last year $30 billion in new loans were extended by banks while $50 billion in old loans were paid off by borrowers. What happened to the money supply?

Answer 1

So, 30 billions were borrowed and 50 billion were returned, which means that the amount returned was bigger than the amount borrowed. This means that the there is now less money in the circulation (on people's accounts, money being exchanged between people), which means that the money supply decreased.