The multiple by which total deposits can increase for every pound increase in reserves is the ?
Correct answer: A. Money multiplier
- A. Money multiplier
- B. liquidity ratio
- C. bank's line of credit
- D. required reserve ratio
Explanation
The money multiplier is the multiple by which deposits or the money supply can expand from an initial increase in bank reserves. The required reserve ratio determines the size of that multiplier but is not the multiplier itself.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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