Question

1. Describe the effect each action below will have on the money supply. Explain your reasoning.

Banks decide to keep more of their assets as reserves in order to avoid risking a shortage of the required reserve.

Answer 1

What will happens to the cash supply if the banks choose to keep a greater amount of their benefits as stores with a specific end goal to abstain from gambling a deficiency of the required hold is that it would NOT contract the cash supply, it would worthy motivation the supply of cash to develop at a slower pace. So it would diminish the rate of development of the cash supply.