The simple deposit multiplier is the ratio of the amount of:
A)new reserves created by the banks to the amount of deposits.
B)new reserves created by the banks to the amount of loans.
C)deposits created by the banks to the amount of new reserves.
D)deposits created by the banks.

Question

Quizplus · Accepted Answer

The simple deposit multiplier is the ratio of the amount of deposits created by the banks to the amount of new reserves. This reflects how the banking system can expand the money supply through the process of making loans out of new reserves.

The Simple Deposit Multiplier Is the Ratio of the Amount