Answer to Question #283041 in Economics for Sona

Question

How would each of the following affect the India’s money supply? Explain. 

a- Banks decide to hold more excess reserves 

b- People withdraw cash from their bank accounts for Christmas shopping. 

c- The introduction of automatic teller machines, which allow people to withdraw cash from 

the bank as needed, makes deposits relatively more convenient.

Answer 1

a. If banks decide to hold more excess reserves, then the money supply will decrease.

b. If people withdraw cash from their bank accounts for Christmas shopping, then the money supply will decrease.

c. If the introduction of automatic teller machines allow people to withdraw cash from the bank as needed, makes deposits relatively more convenient, then the money supply will increase.