Suppose that people decide to hold more money as cash.Which statement best illustrates the impact of this action on the money multiplier? The money multiplier

Question

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When people hold more money as cash, the currency drain ratio increases because the proportion of money that is held in cash rather than in bank deposits increases. As a result, the money multiplier decreases because banks can lend out less of their deposits when people hold more cash.

Suppose That People Decide to Hold More Money as Cash