Suppose the Proportion of Deposits That Individuals Wish to Hold

question 24

Multiple Choice

Suppose the proportion of deposits that individuals wish to hold as cash were to rise from 5% to 10%.Then,

• A)the money supply will rise because people have more cash.
• B)bank deposits will fall by the same amount as if the reserve-holding ratio had risen by 5 percentage points.
• C)the supply of high-powered money will rise because cash has risen.
• D)the money supply will change by the same amount as if the reserve-holding ratio had risen by 5 percentage points.

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