Asked by Wahidah Mat Nasir on Apr 25, 2024
Verified
Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall.
Excess Reserves
The amount of reserves held by banks over and above the regulatory requirements, indicating extra liquidity.
Money Supply
The collective amount of cash, coins, and checking and savings account balances representing monetary assets in an economy at a given time.
- Grasp the elementary operations and ramifications of monetary policy, in conjunction with the role of the Federal Reserve.
Verified Answer
NM
Najah Majors4 days ago
Final Answer :
False
Explanation :
When banks decide to hold a smaller part of their deposits as excess reserves, they have more funds available to lend out. This increase in lending can lead to an increase in the money supply, as loans create deposits in the banking system, effectively multiplying the amount of money in circulation.
Learning Objectives
- Grasp the elementary operations and ramifications of monetary policy, in conjunction with the role of the Federal Reserve.
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