Macro 2009 FRQ #3- Money Multiplier

The video tutorial covers a macroeconomics exam question on banking and money creation. It explains reserve requirements, initial deposits, and how banks can loan out money. The concept of the money multiplier is introduced, showing how initial deposits can lead to a larger increase in demand deposits. The tutorial also discusses the impact of the Federal Reserve buying bonds, which increases the money supply. Finally, it examines how expansionary monetary policy affects real wages by increasing inflation and aggregate demand.

Explain why the total money supply increased by only $400 in Part B.

What happens to real wages when the Fed conducts expansionary monetary policy?