If Debit Cards Become More Widely Used by Consumers and Businesses

question 64

Multiple Choice

If debit cards become more widely used by consumers and businesses, which of the following is most likely to happen?

• A) Currency holdings will remain the same, but the M1 money supply will fall.
• B) The amount of currency held by the public will increase.
• C) Less money will be held as currency and more money will be held in bank accounts, which will increase the reserves of banks unless the Fed takes offsetting actions.
• D) The money supply will be unaffected because debit card expenditures are considered the equivalent of cash.

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