The multiplier used to assess the impact of monetary policy on the economy is equal to:
A) excess reserves times the required reserve ratio.
B) total deposits times the required reserve ratio.
C) one divided by the required reserve ratio.
D) the required reserve ratio divided by excess reserves.

Question

Quizplus · Accepted Answer

The multiplier used to assess the impact of monetary policy on the economy, often referred to as the money multiplier, is equal to one divided by the required reserve ratio. This multiplier reflects how much the money supply can potentially increase with an initial injection of reserves into the banking system.

The Multiplier Used to Assess the Impact of Monetary Policy