The currency drain reduces the amount of
A) currency available for banks to borrow from the Reserve Bank.
B) open market operations the Reserve Bank can make.
C) reserves available to banks to make loans.
D) currency the Reserve Bank has outstanding in the economy.
E) the monetary base.

Question

Quizplus · Accepted Answer

The currency drain reduces the amount of reserves available to banks to make loans because when individuals withdraw currency from banks, the banks' reserves decrease, limiting their ability to lend.

The Currency Drain Reduces the Amount of