The actual expansion of the money supply is likely to be ____ than the amount indicated by the deposit expansion multiplier because ____.

Question

Quizplus · Accepted Answer

The actual expansion of the money supply is likely to be smaller than the amount indicated by the deposit expansion multiplier because some cash may leak out of the banking system. For instance, people may keep some cash at home or use it for transactions outside the banking system. This reduces the amount of money that banks can lend out, and therefore the overall expansion of the money supply.

The Actual Expansion of the Money Supply Is Likely to Be