If the public decides to hold more currency and fewer deposits in banks, what happens to...

If the public decides to hold more currency and fewer deposits in banks, what happens to bank reserves and the money supply after all adjustments are made?

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after all adjustment reserves will decrease and money supply also eventually decrease in the economy. all bank have required reserve ratio and money supply by giving the loan, but if bank don't have required reserve then bank don't made the loan and money supply.
Because, to circulate the money in the economy, that required to deposits the money in the bank that effect is to grow economy, because, if the public are hold the the money in their home and less deposited the money then money are not circulating in the economy and day by day inflation will increase so that money's value is down day by day.
And if the money supply will decrease automatically increase in the interest rate will be higher in this situation. because when bank have more reserve then bank will give the loan to the public but if bank don't have requirede reserve then bank don't give the loan to the public then money supply will fall down.
Thank you

Rahul Sunny answered 7 months ago

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If the public decides to hold more currency and fewer deposits in banks, what happens to...

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