Suppose that the general public decided to increase its holdings of currency and decrease its checking deposits by an equal amount. If the Federal Reserve does not take any offsetting action, banks will their outstanding loans, thereby the money supply.

Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 10CQ
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Suppose that the general public decided to increase its holdings of currency and decrease its checking deposits by an equal amount.
If the Federal Reserve does not take any offsetting action, banks will
their outstanding loans, thereby
the
money
supply.
Transcribed Image Text:Suppose that the general public decided to increase its holdings of currency and decrease its checking deposits by an equal amount. If the Federal Reserve does not take any offsetting action, banks will their outstanding loans, thereby the money supply.
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