In the early 1930s,the currency ratio rose,as did the level of excess reserves.Money supply analysis predicts that,everything else held constant,the money supply should have

Question

Quizplus · Accepted Answer

According to the money supply analysis, if the currency ratio (the amount of currency held by the public relative to deposits in banks) rises and the level of excess reserves increases, this will reduce the money multiplier and cause the money supply to fall. Therefore, the best choice is B, as the money supply should have fallen, everything else held constant.

In the Early 1930s,the Currency Ratio Rose,as Did the Level