For a given money multiplier, a decrease in the banking system's reserves will cause the money supply to:
A) increase.
B) decrease.
C) remain constant.
D) become difficult to predict.

Question

Quizplus · Accepted Answer

A decrease in the banking system's reserves will reduce the amount of money that banks can create through the money multiplier process, leading to a decrease in the money supply.

For a Given Money Multiplier, a Decrease in the Banking