If many banks fail, this is likely to:
A)increase the ratio of currency to deposits.
B)decrease the ratio of currency to deposits.
C)have no effect on the ratio of currency to deposits.
D)decrease the amount of currency in circulation if the Bank of Canada takes no action.

Question

Quizplus · Accepted Answer

When banks fail, people lose confidence in the banking system and are more likely to hold onto cash rather than deposits, increasing the currency-to-deposit ratio.

If Many Banks Fail, This Is Likely To