Uncertainty may cause banks to hold larger excess reserves.Other things being constant,what impact will this have on the volume of loans and the money supply?

Question

Quizplus · Accepted Answer

When banks hold larger excess reserves, they have less money available to lend out as loans. This tends to reduce the volume of loans, which in turn reduces the money supply. Therefore, choice A is correct.

Uncertainty May Cause Banks to Hold Larger Excess Reserves