The money multiplier is the
A)fraction of the monetary base that is kept in currency.
B)factor by which a change in the monetary base is multiplied to give the change in the quantity of money.
C)factor by which a change in the deposits base is multiplied to give the change in the monetary base.
D)proportion by which a change in the quantity of money changes the monetary base.
E)number of times that the Fed conducts open market operations in a month.

Question

Quizplus · Accepted Answer

The money multiplier is the factor by which a change in the monetary base is multiplied to give the change in the quantity of money. This is because changes in the monetary base (such as through open market operations or changes in reserve requirements) can have a ripple effect throughout the banking system, leading to changes in the money supply. The money multiplier helps to measure and predict these changes.

The Money Multiplier Is the