If Banks Allow Some of Their Excess Reserves to Remain

question 53

Multiple Choice

If banks allow some of their excess reserves to remain in the vault,

• A)the simple money multiplier will exceed the actual money multiplier
• B)the simple money multiplier will understate the expansion of credit
• C)the actual money multiplier and the simple money multiplier will be equal
• D)banks will earn more interest
• E)credit expansion will be greater than if they had lent out these reserves

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