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18 May, 00:37

What could happen at each stage of the money creation process to prevent the money supply from increasing the full amount predicted by the deposit expansion multiplier?

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  1. 18 May, 00:49
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    Banks could hold on to their excess reserves and not loan them out, and people could hold on to their proceeds as cash. By holding on to the money and not putting it back into the money supply, it will keep the supply from continuing to increase at a high level.
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