What Happens to the Value of the Deposit Multiplier When

question 29

Multiple Choice

What happens to the value of the deposit multiplier when banks hold excess reserves?

• A) It is larger than the value implied by the formula.
• B) It is smaller than the value implied by the formula.
• C) It is only affected by the amount of loans that banks are willing to make, not the amount of excess reserves held.
• D) There is insufficient information to answer the question.

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