________ increases the size of the money multiplier.
A)An increase in the currency drain ratio
B)An open market purchase of government securities by the Fed
C)A reduction in the desired reserve ratio
D)An open market sale of government securities by the Fed
E)An increase in the size of open market operations

Question

Quizplus · Accepted Answer

A reduction in the desired reserve ratio increases the money multiplier because banks can lend out a larger portion of their deposits, thereby increasing the overall money supply.

________ Increases the Size of the Money Multiplier