The money supply would tend to rise if:

Question

Quizplus · Accepted Answer

Banks keeping fewer excess reserves means they have more money to lend out, which leads to an increase in the money supply. Additionally, people depositing currency into their demand deposit accounts also increases the money supply as it increases the amount of funds available for banks to lend out. However, if people convert more of their demand deposits to currency, this decreases the amount of funds available for banks to lend out, leading to a decrease in the money supply. And if banks decide to keep more excess reserves, this also decreases the amount of funds available for lending, leading to a decrease in the money supply.

The Money Supply Would Tend to Rise If