The currency drain reduces the amount of
A)reserves available to banks to make loans.
B)currency the Fed has outstanding in the economy.
C)currency available for banks to borrow from the Fed.
D)the monetary base.
E)open market operations the Fed can make.

Question

Quizplus · Accepted Answer

Currency drain refers to a situation where individuals and businesses withdraw cash from banks, leading to a decrease in the currency held by banks. As a result, banks have fewer reserves available to make loans, which reduces the money supply and the monetary base. Therefore, the correct choice is A) reserves available to banks to make loans.

The Currency Drain Reduces the Amount of