Use the following to answer questions :
-(Scenario: Monetary Base and Money Supply) Look at the scenario Monetary Base and Money Supply. By how much can checkable bank deposits increase?

Question

Use the following to answer questions : 
-(Scenario: Monetary Base and Money Supply) Look at the scenario Monetary Base and Money Supply. By how much can checkable bank deposits increase?

Quizplus · Accepted Answer

The increase in checkable bank deposits depends on the reserve requirement and the initial change in reserves. Assuming a typical reserve requirement, a $100 billion increase in reserves can lead to a $500 billion increase in checkable deposits through the money multiplier effect.

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