How will an increase in banks' desire for liquidity affect the extent of monetary expansion and the value of the multiplier?

Question

Quizplus · Accepted Answer

An increase in banks' desire for liquidity will lead to a decrease in the amount of loans banks are willing to make, which will in turn decrease the extent of monetary expansion. This decrease in the amount of loans will also affect the value of the multiplier, as every dollar deposited in the banking system will lead to a smaller increase in the money supply due to a smaller amount of loans being made. Therefore, both the extent of monetary expansion and the value of the multiplier will decrease.

How Will an Increase in Banks' Desire for Liquidity Affect