If individuals do not hold currency, we know that:

Question

Quizplus · Accepted Answer

If individuals do not hold currency, it implies that all money is held as deposits in banks. This means c (the currency ratio, which is the amount of currency individuals hold relative to deposits) is 0 (B). Consequently, the money supply (M) equals demand deposits (Dd) because there's no currency held outside (C). The money multiplier, which is 1/(reserve ratio + currency ratio), simplifies to 1/reserve ratio if the currency ratio (c) is 0, but without knowing the reserve ratio, we cannot directly conclude the multiplier is 1/8 from this information alone, so A is not directly inferred from the premise but is a part of the broader implications under specific conditions. H = Rd indicates that the monetary base (H) equals the reserves held at the bank (Rd), which is true if all money is deposited in banks and there's no currency outside (D). Therefore, considering the implications of no currency being held by individuals, all the statements can be seen as correct under the assumption or implications of the given condition, making E the correct choice.

If Individuals Do Not Hold Currency, We Know That