Assume that banks become less conservative in their lending policies and start holding no excess reserves. Compared to a situation in which banks are holding excess reserves, the size of the money supply will be

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When banks hold no excess reserves, they will be able to lend more money to the public. This will result in a larger money supply in the economy as more money is circulating. Therefore, the size of the money supply will be larger in a situation where banks are not holding excess reserves.

Assume That Banks Become Less Conservative in Their Lending Policies