If banks decide to hold excess reserves, the multiple expansion of bank deposits will be limited.

Question

Quizplus · Accepted Answer

Holding excess reserves means that banks are not lending out all of their available funds, which limits the creation of new deposits through the deposit multiplication process. When banks hold excess reserves, they have less available funds to lend out, which limits the multiple expansion of bank deposits.

If Banks Decide to Hold Excess Reserves, the Multiple Expansion