If Rodrigo writes a $1,000 check to his landlord and his landlord deposits that money into his or her bank, the money supply can increase by the amount of that check times the money multiplier.

Question

Quizplus · Accepted Answer

The money supply does not increase by the amount of the check times the money multiplier because the check is simply transferring existing funds from Rodrigo's account to the landlord's account, not creating new money.

If Rodrigo Writes a $1,000 Check to His Landlord and His