If the excess reserves-to-deposit ratio decreases and the monetary base is unchanged,the value of the money multiplier will ________ and the value of the money supply will ________.

Question

Quizplus · Accepted Answer

A decrease in the excess reserves-to-deposit ratio means banks are holding less in reserves and are lending more. This increases the money multiplier, which in turn increases the money supply, assuming the monetary base is unchanged.

If the Excess Reserves-To-Deposit Ratio Decreases and the Monetary Base