which of the following best describes the use of the money multiplier (\\(\\frac{1}{rr}\\))? choose 1…

which of the following best describes the use of the money multiplier (\\(\\frac{1}{rr}\\))? choose 1 answer: a to determine the difference between the actual expansion of the money supply and the predicted expansion of the money supply b to determine how much a banks excess reserves will change as a result of a new bank deposit c to determine the size of the change in the money supply as a result of a change in the monetary base d to determine the final impact that an increase in government spending will have on aggregate demand e to determine how much a banks required reserves will change as a result of a new bank deposit

which of the following best describes the use of the money multiplier (\\(\\frac{1}{rr}\\))? choose 1 answer: a to determine the difference between the actual expansion of the money supply and the predicted expansion of the money supply b to determine how much a banks excess reserves will change as a result of a new bank deposit c to determine the size of the change in the money supply as a result of a change in the monetary base d to determine the final impact that an increase in government spending will have on aggregate demand e to determine how much a banks required reserves will change as a result of a new bank deposit

Answer

Brief Explanations:

The money - multiplier formula $\frac{1}{rr}$ (where $rr$ is the required - reserve ratio) is used to calculate the potential change in the money supply based on a change in the monetary base. When there is a change in the monetary base (such as through open - market operations by the central bank), the money multiplier helps determine how much the money supply will expand or contract.

Answer:

C. To determine the size of the change in the money supply as a result of a change in the monetary base