If you write a $1,000 check to your landlord and your landlord deposits that money into his or her bank, the money supply can increase by the amount of that check times the money multiplier.

Question

Quizplus · Accepted Answer

The money supply does not increase simply by depositing a check; it is a transfer of existing funds. The money multiplier effect occurs when banks lend out deposits, not just from the act of depositing a check.

If You Write a $1,000 Check to Your Landlord and Your