The money multiplier tends to be greater when

Question

Quizplus · Accepted Answer

The money multiplier is the ratio of the money supply to the monetary base. The monetary base is the total amount of currency in circulation plus the total amount of bank reserves held at the central bank. If individuals hold less cash, they deposit more money in banks, increasing bank reserves and the monetary base. This, in turn, increases the money supply and the money multiplier. Therefore, the money multiplier tends to be greater when individuals hold less cash.

The Money Multiplier Tends to Be Greater When