Suppose the Public Decides to Hold More Currency and Fewer

question 54

Multiple Choice

Suppose the public decides to hold more currency and fewer deposits in banks. Which of the following best describes the effects of this decision?

• A)Bank reserves decrease, and the money supply eventually decreases.
• B)Bank reserves decrease, but the money supply does not change.
• C)Bank reserves increase, and the money supply eventually increases.
• D)Bank reserves increase, but the money supply does not change.