The multiple by which total deposits can increase for every dollar increase in ________ is the money multiplier.

Question

Quizplus · Accepted Answer

The money multiplier is the multiple by which total deposits can increase for every dollar increase in reserves. This means that the amount of money that can be created through the banking system depends on the reserve requirements set by the central bank. When the reserve requirement is lower, banks can lend out more, which increases the money supply through the money multiplier effect. Therefore, the correct answer is D) reserves.

The Multiple by Which Total Deposits Can Increase for Every