If people decide to hold more of their assets in the form of cash then what will happen to the value of the money multiplier?

Question

Quizplus · Accepted Answer

The value of the money multiplier is a function of the reserve ratio. When people hold more of their assets in the form of cash, banks are left with excess reserves, reducing the need for them to engage in lending activities. This decreases the money multiplier, as the ratio of money supply to the monetary base goes down. Therefore, the correct answer is D, which states that the value of the money multiplier will be decreased.

If People Decide to Hold More of Their Assets in the Form