A decrease in the parameter, c, the proportion of money individuals wish to hold as currency, will tend to cause which of the following?

Question

Quizplus · Accepted Answer

When c, the proportion of money individuals wish to hold as currency, decreases, it means that more money is being deposited in banks rather than held as cash. This increases the base for the money multiplier effect, as banks can lend out a portion of these deposits, creating more money through the banking system. Therefore, a decrease in c leads to an increase in the money multiplier.

A Decrease in the Parameter, C, the Proportion of Money