In an attempt to bring lenders and borrowers together following the financial crisis of 2008,the Federal Reserve made a large amount of new funds available to financial markets.The Fed expected this to increase in the money supply and the total amount of lending because of the multiplier effect,in which a given amount of new reserves results in a multiple increase in

Question

Quizplus · Accepted Answer

The multiplier effect refers to the idea that an initial injection of funds into the economy (such as those provided by the Federal Reserve) can result in a larger increase in the money supply as those funds are deposited into banks and then lent out multiple times. This increase in lending results in an increase in bank deposits (Choice B), rather than stockholders' equity, long-term debt or required reserves.

In an Attempt to Bring Lenders and Borrowers Together Following