If people decide to hold more currency relative to deposits,the money supply
A)falls.The larger the reserve ratio is,the more the money supply falls.
B)falls.The larger the reserve ratio is,the less the money supply falls.
C)rises.The larger the reserve ratio is,the more the money supply rises.
D)rises.The larger the reserve ratio is,the less the money supply rises.

Question

Quizplus · Accepted Answer

When people hold more currency, banks have fewer deposits to lend out, reducing the money supply. A larger reserve ratio means banks hold more reserves and lend out less, so the money supply falls less.

If People Decide to Hold More Currency Relative to Deposits,the