Real-world accuracy of the money multiplier can be affected by:
A) the amount of loans provided by nonbanks.
B) the way the public divides its holding of M1 between currency and certificates of deposit.
C) the willingness of banks to loan excess reserves.
D) all of the above.

Question

Quizplus · Accepted Answer

All of the factors listed can affect the accuracy of the money multiplier. Nonbanks, such as finance companies and credit unions, also provide loans which can affect the total amount of loans in the economy. The preference of the public to hold either currency or certificates of deposit also affects the multiplier as different amounts of each affects the money supply differently. Lastly, the willingness of banks to loan excess reserves can affect the total amount of loans in the economy which in turn affects the accuracy of the money multiplier.

Real-World Accuracy of the Money Multiplier Can Be Affected By