All else equal, the _____ the amount of cash held by individuals and the _____ the reserve requirement, the lower will be the amount of money created as a result of the Federal Reserve purchasing government securities.

Question

Quizplus · Accepted Answer

When individuals hold more cash and the reserve requirement is higher, banks have less capacity to create money through lending, reducing the money multiplier effect of the Federal Reserve's actions.

All Else Equal, the _____ the Amount of Cash Held