During a bank run,depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits.
A)Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase.
B)Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease.
C)The decision to hold relatively more currency would make the money supply increase.The decision to hold relatively more excess reserves would make the money supply decrease.
D)The decision to hold relatively more currency would make the money supply increase.The decision to hold relatively more excess reserves would make the money supply decrease

Question

Quizplus · Accepted Answer

Both actions reduce the amount of money available for lending and circulation, thus decreasing the money supply.

During a Bank Run,depositors Decide to Hold More Currency Relative