If the Federal Reserve increases the interest rate on bank deposits at the Fed,banks will want to hold
A)fewer reserves,so the money multiplier will fall.
B)fewer reserves,so the money multiplier will rise.
C)more reserves,so the money multiplier will fall.
D)more reserves,so the money multiplier will rise.

Question

Quizplus · Accepted Answer

When the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold more reserves as it becomes more attractive for them to keep their funds with the Fed. This will result in a decrease in lending and the money multiplier will fall.

If the Federal Reserve Increases the Interest Rate on Bank