To the extent that a bank holds excess reserves,which of the following is a consequence?

Question

Quizplus · Accepted Answer

When a bank holds excess reserves, it reduces the amount of funds available for lending, which means the deposit multiplier (the amount by which deposits increase in response to an increase in reserves) is smaller. Therefore, choice A is the correct answer. B, C, D, and E are all incorrect because they are not consequences of holding excess reserves.

To the Extent That a Bank Holds Excess Reserves,which of the Following