A currency drain is
A)an increase in currency held outside banks.
B)when excess reserves are greater than desired reserves.
C)when the bank either buys or sells securities.
D)when excess reserves are loaned to individuals.
E)when the bank raises the excess reserve ratio.

Question

Quizplus · Accepted Answer

A currency drain refers to an increase in currency held outside banks, which reduces the amount of reserves banks have to lend out. This can lead to a decrease in the money supply and an increase in interest rates.

A Currency Drain Is