When the Bank of Canada supplies the banking system with an extra dollar of reserves, deposits increase by more than one dollar-a process called ________.

Question

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This process is called multiple deposit creation because banks can use the extra reserves to make loans, which will in turn create more deposits in the banking system. As a result, the increase in deposits will be greater than the initial increase in reserves provided by the Bank of Canada.

When the Bank of Canada Supplies the Banking System with an Extra