which of the following scenarios would cause the money multiplier to be smaller than predicted by the…

which of the following scenarios would cause the money multiplier to be smaller than predicted by the calculation below?\n1/reserve ratio\nchoose 1 answer:\na banks count loans as assets.\nb banks use fractional reserve banking.\nc banks count deposits as liabilities.\nd people keep all of their money in banks instead of holding cash.\ne banks hold excess reserves.

which of the following scenarios would cause the money multiplier to be smaller than predicted by the calculation below?\n1/reserve ratio\nchoose 1 answer:\na banks count loans as assets.\nb banks use fractional reserve banking.\nc banks count deposits as liabilities.\nd people keep all of their money in banks instead of holding cash.\ne banks hold excess reserves.

Answer

Brief Explanations:

The money - multiplier formula $\frac{1}{reserve\ ratio}$ assumes banks loan out all excess reserves. When banks hold excess reserves, the actual reserve ratio is higher than the required reserve ratio used in the simple formula. A higher effective reserve ratio leads to a smaller money multiplier. Options A, B, C, and D are standard banking practices that do not directly affect the deviation of the actual money - multiplier from the simple formula value.

Answer:

E. Banks hold excess reserves.