If the currency deposit ratio increases, ceteris paribus, the money multiplier

Question

Quizplus · Accepted Answer

The currency deposit ratio is the fraction of deposits that people hold in the form of currency rather than depositing in banks. An increase in this ratio results in a decrease in the amount of deposits that banks have available to lend out, thus reducing the money multiplier. Therefore, the correct choice is B), i.e., the money multiplier decreases.

If the Currency Deposit Ratio Increases, Ceteris Paribus, the Money