The simple money multiplier tells the relationship between which of the following?

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Quizplus · Accepted Answer

The simple money multiplier tells the relationship between changes in reserves and changes in deposits. Specifically, it is the amount by which the money supply expands for every $1 increase in reserves held by banks. The formula for the simple money multiplier is 1/required reserve ratio. This means that if the required reserve ratio is 10%, then the simple money multiplier is 1/0.1 = 10. So, if banks receive an additional $100 in reserves, they can lend out up to $1,000 (10 times the amount of reserves) which can then enter the wider economy and increase the money supply.

The Simple Money Multiplier Tells the Relationship Between Which of the Following