An increase in the excess reserves banks want to hold, together with people depositing currency into their demand deposit accounts, would:

Question

Quizplus · Accepted Answer

An increase in excess reserves means banks are holding more reserves instead of lending them out, which can decrease the money supply. However, when people deposit currency into demand deposit accounts, it increases the reserves and the potential for banks to create more money through lending. The net effect on the money supply is indeterminate without knowing the relative magnitudes of these changes.

An Increase in the Excess Reserves Banks Want to Hold