If banks decide to hold some of their excess reserves instead of lending them all out, then: A)the money multiplier will be less than 1 divided by the required reserve ratio. B)depositors will have to borrow more in order to increase the money supply. C)the money multiplier becomes 1 divided by the excess reserves. D)a loan of $1 will lead to a change in the money supply by a multiple amount equal to 1 divided by the required reserve ratio.

Excess Reserves are bank-held capital reserves that exceed the minimum reserve requirement set by a…

Answered: If banks decide to hold some of their…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If banks decide to hold some of their excess reserves instead of lending them all out, then:
	A)	the money multiplier will be less than 1 divided by the required reserve ratio.
	B)	depositors will have to borrow more in order to increase the money supply.
	C)	the money multiplier becomes 1 divided by the excess reserves.
	D)	a loan of $1 will lead to a change in the money supply by a multiple amount equal to 1 divided by the required reserve ratio.

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