If commercial banks reduce their holdings of excess reserves:

CA Foundation · Business Economics · MTP · September 2025
If commercial banks reduce their holdings of excess reserves:
(A) A. The money supply falls
(B) B. The money supply increases
(C) C. The monetary base falls
(D) D. None of these

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. The money supply increases

Topics: Money Market

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