If the public switches from doing most of its shopping with currency to using cheques instead,and the Bank of Canada takes no action,the money supply will
A) increase.
B) decrease.
C) not change.
D) either increase or decrease.
E) equal the quantity of currency that is still in usE.

Question

Quizplus · Accepted Answer

When the public switches from using currency to using cheques, the demand for currency decreases. This means that the public is holding less currency, and the banks are holding more. The banks can then lend out this extra money, which increases the money supply.

If the Public Switches from Doing Most of Its Shopping