If banks cannot lend all of their excess reserves:
A) the money multiplier increases.
B) the money multiplier decreases.
C) the money multiplier stays the same.
D) the amount of loans by the bank increases.
E) checkable deposits decrease.

Question

Quizplus · Accepted Answer

If banks cannot lend all of their excess reserves, the money multiplier decreases as there will be less money created through the lending process.

If Banks Cannot Lend All of Their Excess Reserves