If people decide to hold less money as currency and more as checking deposits,this will most likely cause a(n)
A)decrease in bank reserves.
B)decrease in required reserves.
C)increase in the discount rate.
D)increase in the money supply.

Question

Quizplus · Accepted Answer

If people decide to hold less money as currency and more as checking deposits, it will increase the demand for checking deposits. Banks will then lend out more money, increasing the money supply. Therefore, the correct answer is D, an increase in the money supply. A decrease in bank reserves, a decrease in required reserves, and an increase in the discount rate are not the most likely results of this action.

If People Decide to Hold Less Money as Currency and More