If the excess reserves held by banks increase, the money multiplier is likely to
A)rise.
B)fall.
C)remain unchanged.
D)rise at first, then decline later.

Question

Quizplus · Accepted Answer

When the excess reserves held by banks increase, they have less incentive and ability to lend out money to customers, which leads to a decrease in the money supply and a decrease in the money multiplier.

If the Excess Reserves Held by Banks Increase, the Money