In the Nineteenth Century When There Were Often Bank Runs

question 37

Multiple Choice

In the nineteenth century when there were often bank runs caused by crop failures, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, which of the following actions should the banks have done?

• A)They should have increased both the money multiplier and the money supply.
• B)They should have decreased the money multiplier and increased the money supply.
• C)They should have increased the money multiplier and decreased the money supply.
• D)They should have decreased both the money multiplier and the money supply.

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