Which of the Following Changes Would Clearly Decrease the Supply

question 216

Multiple Choice

Which of the following changes would clearly decrease the supply of money in the banking system?

• A)​an increase in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves
• B)​an increase in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves
• C)​a decrease in the percentage of money people want to hold as currency and a decrease in the fraction of deposits banks want to hold as excess reserves
• D)​a decrease in the percentage of money people want to hold as currency and an increase in the fraction of deposits banks want to hold as excess reserves

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Definitions:

Paper Money

Currency in the form of banknotes issued by a government or central bank.

United States

A country located in North America, known for its significant impact on global politics, economy, and culture, being one of the world's largest and most powerful nations.

Federal Reserve Banks

The regional banks that make up the Federal Reserve System, the central banking system of the United States, responsible for monetary policy and financial supervision.

Money Stock

The total quantity of money available in the economy at a particular time, including cash, coins, and balances held in checking and savings accounts.