The creation of new bank reserves could lead to a multiple increase in the money supply.

Name: The creation of new bank reserves could lead to a multiple increase in the money supply.
Brand: Quizplus
Rating: 4.9 (34 reviews)

Question

Quizplus · Accepted Answer

When a central bank creates new bank reserves, it allows commercial banks to lend out more money, which can lead to multiple rounds of lending and deposit creation, ultimately increasing the overall money supply in the economy. This process is known as the money multiplier effect.

The Creation of New Bank Reserves Could Lead to a Multiple