The money multiplier is
A) the amount by which a change in the quantity of money is multiplied to determine the change in the monetary base.
B) the amount by which a change in the monetary base is multiplied to determine the change in the quantity of money.
C) equal to bank reserves divided by the change the quantity of money.
D) equal to bank reserves divided by the change in the monetary base.

Question

Quizplus · Accepted Answer

The money multiplier is the amount by which a change in the monetary base is multiplied to determine the change in the quantity of money. This is because changes in the monetary base, such as an increase in reserves held by the Federal Reserve, can lead to increases in the amount of money that banks can lend out through the creation of deposits. Thus, the money multiplier is a measure of the impact of changes in the monetary base on the broader money supply.

The Money Multiplier Is