Which of the following would lead to a rapid growth of the money supply in the future?
A)the use of large excess reserves by banks to extend additional loans
B)a reduction in government expenditures to reduce the size of the federal deficit
C)an increase in government expenditures financed by taxes
D)an increase in the interest rate the Fed pays banks holding excess reserves

Question

Quizplus · Accepted Answer

When banks use large excess reserves to extend additional loans, it increases the money supply as loans create new deposits in the banking system.

Which of the Following Would Lead to a Rapid Growth