In the economy, a maximum change in the money supply would be equal to an initial change in:
A) actual reserves.
B) excess reserves times the reserve requirement.
C) actual reserves divided by the initial change in excess reserves.
D) excess reserves times the money multiplier.

Question

Quizplus · Accepted Answer

The maximum change in the money supply is equal to an initial change in excess reserves times the money multiplier. The money multiplier reflects how an initial deposit can lead to a larger increase in the total money supply.

In the Economy, a Maximum Change in the Money Supply