If households choose to take some fraction of each cheque they deposit and hold it as currency, then the simple deposit multiplier ________ the real-world multiplier.

Question

Quizplus · Accepted Answer

The simple deposit multiplier assumes all deposits are held at banks, but if households hold some currency, the actual multiplier effect in the real world is reduced, making the simple deposit multiplier greater than the real-world multiplier.

If Households Choose to Take Some Fraction of Each Cheque