Which of the following events would reduce the size of the "real-world" money multiplier?
A) Banks hold more excess reserves.
B) Households hold less currency.
C) The Fed increases the discount rate.
D) The Fed reduces the required reserve ratio.

Question

Quizplus · Accepted Answer

An increase in banks' excess reserves would reduce their lending capacity and ultimately reduce the overall money supply, which would decrease the money multiplier.

Which of the Following Events Would Reduce the Size of the "Real-World