While the Fed can influence the money stock, the ratio of currency to deposits in the country at any given time is determined

Question

Quizplus · Accepted Answer

The ratio of currency to deposits in the country is determined by the public as they hold money in the form they prefer. Banks and lending institutions may influence this ratio through their lending and deposit operations, but ultimately it is the public's preference for holding currency versus deposits that determines the ratio. The Treasury Department and the Fed may have some influence over the amount of currency in circulation through the printing of money and open market operations, but they do not directly determine the currency-to-deposit ratio.

While the Fed Can Influence the Money Stock, the Ratio