The total money supply is largely determined by

Question

Quizplus · Accepted Answer

The lending behavior of commercial banks plays a significant role in determining the total money supply. When banks lend more money, they increase the amount of money in circulation, thereby expanding the money supply. Conversely, when they cut back on lending, they reduce the amount of money in circulation and contract the money supply. Open market operations and changes in the reserve requirement are also tools used by the Federal Reserve to influence the money supply, but they ultimately rely on the decisions made by commercial banks. The deficit policy of the Treasury also has an impact on the overall economy, but it is not the main determinant of the money supply.

The Total Money Supply Is Largely Determined by