If the Federal Reserve increases the monetary base,
A) the value of the money multiplier will increase.
B) the value of the money multiplier will decrease.
C) the value of the money multiplier will not change.
D) the value of the autonomous spending multiplier will decrease.

Question

Quizplus · Accepted Answer

The money multiplier is determined by the reserve requirement set by the Federal Reserve and not directly by changes in the monetary base. Increasing the monetary base does not inherently change the reserve ratio, which is what influences the money multiplier.

If the Federal Reserve Increases the Monetary Base