If there is 100 percent reserve banking, the money supply is unaffected by the proportion of the dollars that the public chooses to hold as currency versus deposits.

Question

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If there is 100 percent reserve banking, banks are required to hold 100 percent of deposits as reserves, which means that the amount of money in circulation is determined solely by the amount of currency in circulation. Therefore, the proportion of the dollars that the public chooses to hold as currency versus deposits does not affect the money supply in this scenario.

If There Is 100 Percent Reserve Banking, the Money Supply