Reserves withdrawn from the banking system will cause a contraction of the nation's money supply.

Name: Reserves withdrawn from the banking system will cause a contraction of the nation's money supply.
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Question

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When reserves are withdrawn from the banking system, banks have less money to lend, which leads to a decrease in the overall money supply as the ability to create new loans through the fractional reserve banking system is reduced.

Reserves Withdrawn from the Banking System Will Cause a Contraction