APFIVE Money Supply and the Money Multiplier
A country is choosing to expand its money supply even though its monetary base has remained constant. What is the most likely cause of this phenomenon?
A
Banks are lending out a larger proportion of their excess reserves, which increases the money multiplier effect.
B
The central bank has begun printing more physical currency, despite a constant monetary base.
C
An increase in the public’s preference for holding cash diminishes the money multiplier.
D
A rise in the reserve requirement has forced banks to hold more funds back, yet somehow the money supply still expands.
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