If the ratio of excess reserves to total deposits that banks desire to hold decreases,
A) the value of the autonomous spending multiplier will increase.
B) the value of the money multiplier will increase.
C) the value of the money multiplier will not change.
D) the value of the money multiplier will decrease.

Question

Quizplus · Accepted Answer

When banks desire to hold a lower ratio of excess reserves to total deposits, they are more willing to lend out their reserves. This increases the amount of money that can be created from a given amount of reserves, thereby increasing the value of the money multiplier.

If the Ratio of Excess Reserves to Total Deposits That