As banks hold more excess reserves, the money multiplier:

Name: As banks hold more excess reserves, the money multiplier:
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Question

Quizplus · Accepted Answer

The money multiplier refers to the amount of money that can be created in the economy from each dollar of excess reserves held by banks. As banks hold more excess reserves, they have less money to lend out, which decreases the multiplier effect and ultimately leads to a decrease in the money supply. Therefore, the correct answer is B.

As Banks Hold More Excess Reserves, the Money Multiplier