If,during a deposit expansion,not all money gets redeposited into the banking system and some leaks out as currency,then the real world multiplier is

Question

Quizplus · Accepted Answer

The real-world multiplier is always smaller than theoretical multiplier 1/RR because some portion of the newly created money leaks out of the banking system in the form of cash holdings. Therefore, the best choice is A, which indicates that the real-world multiplier is smaller than 1/RR.

If,during a Deposit Expansion,not All Money Gets Redeposited into the Banking