Money Supply and the Money Multiplier
If the money supply in a country is expanding while the monetary base remains constant, which of the following is the most likely cause?
A
A rise in the reserve requirement has forced banks to hold more funds back, yet somehow the money supply still expands.
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
Banks are lending out a larger proportion of their excess reserves, which increases the money multiplier effect.
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