While the concept of a deposit multiplier is useful, central bankers are usually more interested in the money multiplier, which defines the relationship between a measure of the money supply that is closely related to spending and income in the economy to the total reserve base available to depository institutions.

Question

Quizplus · Accepted Answer

The money multiplier is indeed of greater interest to central bankers because it directly relates the money supply, which influences spending and income in the economy, to the reserves held by banks. This relationship helps central bankers understand how changes in reserve requirements or central bank policies will affect the overall money supply and, by extension, economic activity.

While the Concept of a Deposit Multiplier Is Useful, Central