The larger the public's currency drain from the banking system, the
A) smaller is the monetary base.
B) smaller is the money multiplier.
C) larger is the monetary base.
D) larger is the money multiplier.

Question

Quizplus · Accepted Answer

The larger the public's currency drain from the banking system, the smaller is the money multiplier. This is because more money held in currency means less money in banks' reserves, which reduces the banks' ability to create new money through lending.

The Larger the Public's Currency Drain from the Banking System