If People Decide To Hold More Currency Relative To Deposits, The Money Supply

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If People Decide To Hold More Currency Relative To Deposits, The Money Supply

ply 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.
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b. falls. The larger the reserve ratio is, the less the money supply falls. ppl decide to take out money from the bank so the reserves go down and then that make the deposits and loans go down (since they are based on the reserve ratio). if the reserve ratio is larger so 20% rather than 10% the bigger reserve ratio falls by less 10% system--> $1 reserves = $10 deposits 20% system --> $1 reserves = $5 deposits
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