Suppose that the cash drain in the banking system increases during holiday periods. As a result,

Question

Quizplus · Accepted Answer

When there is an increase in cash drain during holiday periods, the capacity of the banking system to create deposit money is dampened. This is because banks have less cash available to make loans and create deposits, which leads to a decrease in the money supply. Therefore, option E is the correct answer. Options A, B, C, and D are incorrect as they suggest that there is an increase in the capacity of the banking system to create deposit money or no change in the money supply during holiday periods, which is not true.

Suppose That the Cash Drain in the Banking System Increases