If the public switches from doing most of its shopping with currency to using cheques instead, and the Reserve Bank takes no action, the money supply will:
A)increase
B)decrease
C)not change
D)either increase or decrease

Question

Quizplus · Accepted Answer

If the public switches from using currency to using cheques, the demand for currency will decrease. This will lead to a decrease in the money supply, as the Reserve Bank will not take any action to offset this decrease.

If the Public Switches from Doing Most of Its Shopping