The maximum amount of increase in the money supply that can be caused by an increase in excess reserves is equal to the
A) deposit multiplier * the required reserve ratio.
B) loan multiplier * the change in excess reserves.
C) deposit multiplier ÷ the change in excess reserves.
D) deposit multiplier * the change in excess reserves.

Question

Quizplus · Accepted Answer

The maximum amount of increase in the money supply is equal to the deposit multiplier (F1S1) multiplied by the change in excess reserves (F1F1F10). Therefore, the correct answer is D.

The Maximum Amount of Increase in the Money Supply That