Homework Answers
Solution : Option ( C ) A change in money multiplier .
Reason. : During recession to increase aggregate demand Federal bank purchases securities from commercial banks through its open market operation function . This results in increase in bank reserves , increase in money supply and decrease in interest rates . But it can't bring any change in multiplier because change in multiplier depends on the percentage of deposits that banks are required to hold as reserves . Money multiplier refers to how an initial deposit can lead to a bigger final increase in the total money supply .
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