What Must Be True When Banks Hold Excess Reserves

question 13

Multiple Choice

What must be true when banks hold excess reserves?

• A) The money multiplier overestimates how much money will be created in the economy.
• B) The money multiplier underestimates how much money will be created in the economy.
• C) The reserve ratio is not fully functioning and should be raised.
• D) The reserve ratio is working too well and should be lowered.

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