If banks choose to hold excess reserves
A)Lending decreases, and the money supply decreases.
B)Lending increases, and the money supply increases.
C)Lending decreases, and the money supply increases.
D)None of these.

Question

Quizplus · Accepted Answer

If banks choose to hold excess reserves, they are not lending out as much money. This means that there is less money circulating in the economy, so the money supply decreases.

If Banks Choose to Hold Excess Reserves