Which of the following best describes the use of the money multiplier
$$
\left(\frac{1}{r r}\right) ?
$$

Choose 1 answer:

A To determine the size of the change in the money supply as a result of a change in the monetary base
(B) To determine how much a bank's required reserves will change as a result of a new bank deposit
(c) To determine how much a bank's excess reserves will change as a result of a new bank deposit

D To determine the difference between the actual expansion of the money supply and the predicted expansion of the money supply
(E) To determine the final impact that an increase in government spending will have on aggregate demand

Question

Which of the following best describes the use of the money multiplier
$$
\left(\frac{1}{r r}\right) ?
$$

Choose 1 answer:

A To determine the size of the change in the money supply as a result of a change in the monetary base
(B) To determine how much a bank's required reserves will change as a result of a new bank deposit
(c) To determine how much a bank's excess reserves will change as a result of a new bank deposit

D To determine the difference between the actual expansion of the money supply and the predicted expansion of the money supply
(E) To determine the final impact that an increase in government spending will have on aggregate demand

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ The money multiplier is given by the formula $ \left(\frac{1}{rr}\right) $, where $ rr $ is the required reserve ratio. ‖ ‖ step 2 ⋮ The money multiplier is used to determine the size of the change in the money supply as a result of a change in the monetary base. This is because the money multiplier shows how much the money supply can increase based on the reserves held by banks. ‖ ‖ step 3 ⋮ The correct answer choice is the one that describes the use of the money multiplier in determining the change in the money supply due to a change in the monetary base. ‖ ***A*** ∻Key Concept∻ ⚹Money Multiplier⚹ ∻Explanation∻ ⚹The money multiplier is used to determine the size of the change in the money supply as a result of a change in the monetary base.⚹◊What is the formula for calculating the money multiplier?⍭ Generate me a similar question◊

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