If a $500 increase in reserves ultimately leads to a $2,000 increase in the money supply, the money multiplier is:
A) 0.5.
B)1.
C)4.
D) 40.

Name: If a $500 increase in reserves ultimately leads to a $2,000 increase in the money supply, the money multiplier is: A) 0.5. B)1. C)4. D) 40.
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Question

Quizplus · Accepted Answer

The money multiplier is calculated as the ratio of the change in the money supply to the change in reserves. In this case, the money multiplier would be 2,000/500 = 4.

If a $500 Increase in Reserves Ultimately Leads to a $2,000