Asked by Phyllisa Starks on May 31, 2024
Verified
If banks choose not to lend out their excess reserves,the money supply will not expand.
Excess Reserves
The amount of reserves a bank holds beyond the required minimum, which can be lent out to stimulate economic activity or held to meet future needs.
- Understand the role of banks in the money supply process.
- Understand the process through which money supply expands or contracts.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
True
Explanation :
Excess reserves are the reserves that banks hold in addition to the required reserves. If banks choose not to lend out their excess reserves, then the money supply will not expand because the funds are not being circulated through loans to consumers or businesses.
Learning Objectives
- Understand the role of banks in the money supply process.
- Understand the process through which money supply expands or contracts.
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