If some people who receive bank loans hold part of the amount as currency instead of depositing the full amount, the deposit multiplier to be ________ it would have been if all loans are fully deposited in banks.

Question

Quizplus · Accepted Answer

The deposit multiplier would be smaller than it would have been if all loans were fully deposited in banks because a portion of the loan is held as currency rather than being deposited, reducing the amount of money available for banks to lend out and creating a smaller multiplier effect.

If Some People Who Receive Bank Loans Hold Part of the Amount