Which statement does NOT explain why the actual money multiplier and the potential money multiplier are different?
A) Banks hold excess reserves during tough economic times.
B) The interest rate that banks pay on deposits is very low.
C) Foreign deposits in American banks are not counted in the actual money multiplier.
D) Foreign consumers, businesses, and governments hold U.S. dollars.

Question

Quizplus · Accepted Answer

Foreign deposits in American banks are counted in the actual money supply, so they do not explain the difference between the actual and potential money multipliers.

Which Statement Does NOT Explain Why the Actual Money Multiplier