If people choose to hold some of a newly received loan as cash instead of keeping it in a checking account,_____.

Question

Quizplus · Accepted Answer

If some of the newly received loan is held as cash instead of being deposited into a checking account, the amount of money that is circulating in the economy will not increase as much as it would have had all of the money been deposited. This is because cash is not counted as part of the money supply, whereas deposits are. Therefore, the money supply will increase, but not as much as it would have if all of the loan had been deposited.

If People Choose to Hold Some of a Newly Received