If people decide to hold more currency relative to deposits,the money supply
A)falls.The larger the reserve ratio is, the more it falls.
B)falls.The larger the reserve ratio is, the less it falls.
C)rises.The larger the reserve ratio is, the more it rises.
D)rises.The larger the reserve ratio is, the less it rises.

Question

Quizplus · Accepted Answer

When people hold more currency, banks have fewer deposits to lend out, reducing the money multiplier effect. A larger reserve ratio means banks hold more reserves and lend out less, so the money supply falls less.

If People Decide to Hold More Currency Relative to Deposits,the