Everything else held constant,if the sum of the required reserve ratio and the excess reserve ratio is less than one,an increase in the currency-deposit ratio causes the M1 money multiplier to ________ and the money supply to ________.

Question

Quizplus · Accepted Answer

The M1 money multiplier decreases because an increase in the currency-deposit ratio means that more money is being held as currency rather than deposited in banks, which reduces the base for creating additional money through the banking system. Consequently, the money supply also decreases because there is less money being multiplied through the banking system's lending activities.

Everything Else Held Constant,if the Sum of the Required Reserve