The Actual Money Multiplier Is Smaller Than the Simple Money

question 232

Multiple Choice

The actual money multiplier is smaller than the simple money multiplier because

• A)the actual multiplier involves M2 rather than M1
• B)cash withdrawals reduce the amount banks can lend out
• C)withdrawals from checkable deposits increase the amount of excess reserves each bank receives
• D)the Fed wants to reduce the money supply
• E)the actual multiplier uses a different measure of reserve requirements

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