When the Fed supplies the banking system with an extra dollar of reserves,deposits increase by more than one dollar-a process called

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When the Fed supplies the banking system with an extra dollar of reserves, the banking system is able to use that dollar to make loans, which in turn become deposits in other banks. This process can continue, leading to multiple rounds of deposit creation for every dollar of reserves injected into the system, resulting in the expansion of the overall money supply. This is known as multiple deposit creation. Option A, C, and D are not accurate descriptions of the process.

When the Fed Supplies the Banking System with an Extra