The money multiplier is used to determine how much the
A)monetary base increases when the Fed purchases government securities.
B)quantity of money increases when the monetary base increases.
C)monetary base increases when the quantity of money increases.
D)quantity of money increases when the required reserve ratio increases.
E)monetary base increases when the Fed sells government securities.

Question

Quizplus · Accepted Answer

The money multiplier is a formula that helps determine the total increase in the money supply that results from an initial increase in the monetary base (such as when the Fed conducts open market operations). It is calculated by dividing the change in the money supply by the change in the monetary base. Therefore, the money multiplier is used to determine how much the quantity of money increases when the monetary base increases.

The Money Multiplier Is Used to Determine How Much the