During Recessions, Banks Typically Choose to Hold More Excess Reserves

question 146

Multiple Choice

During recessions, banks typically choose to hold more excess reserves relative to their deposits. Which statement best describes the effects of the increase in reserves?

• A) The money multiplier increases, and the money supply increases.
• B) The money multiplier decreases, and the money supply decreases.
• C) The money multiplier does not change, but the money supply increases.
• D) The money multiplier does not change, but the money supply decreases.