Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.

Question

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When banks decide to hold a smaller part of their deposits as excess reserves, they have more funds available to lend out. This increase in lending can lead to an increase in the money supply, as loans create deposits in the banking system, effectively multiplying the amount of money in circulation.

Other Things the Same, If Banks Decide to Hold a Smaller