Assertion (A): A rise in the public's currency-deposit ratio lowers the money multiplier.
Reason (R): Cash held outside banks cannot be used by banks to make loans.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

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CorrectNot quiteAnswer A

Correct answer: A

The more the public holds as cash, the less returns to banks as deposits to lend.
R explains A.

Concept: Currency drain
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsHigh-powered money

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Assertion (A): A rise in the public's currency-deposit ratio lowers the money multiplier.Reason (R): Cash held outside banks cannot be used by banks to make loans.

Explanation

Assertion (A): A rise in the public's currency-deposit ratio lowers the money multiplier.
Reason (R): Cash held outside banks cannot be used by banks to make loans.