Which of the following changes would be the mostlikely to reduce the size of the money multiplier?a. a decrease in the required reserve ratiob. a decrease in excess reservesc. an increase in cash holding by consumersd. a decrease in bank runse. an increase in deposit insurance

The money multiplier is a measure of the maximum amount of new demand-deposit money that can be created by a single initial dollar of excess reserves. It is affected by the required reserve ratio, the amount of excess reserves, cash holdings by consumers, bank runs, and deposit insurance.

a. A decrease in the required reserve ratio would likely increase the money multiplier. The required reserve ratio is the percentage of deposits that banks are required to keep on hand. If this ratio decreases, banks can lend out more money, which can increase the money multiplier.

b. A decrease in excess reserves would likely decrease the money multiplier. Excess reserves are funds that banks have on hand that are above the required level. If banks have fewer excess reserves, they have less money to lend out, which can decrease the money multiplier.

c. An increase in cash holding by consumers would likely decrease the money multiplier. When consumers hold more cash, there is less money in the banking system, which can decrease the money multiplier.

d. A decrease in bank runs would likely increase the money multiplier. Bank runs occur when a large number of customers withdraw their deposits because they believe the bank might become insolvent. If there are fewer bank runs, there is more stability in the banking system, which can increase the money multiplier.

e. An increase in deposit insurance would likely increase the money multiplier. Deposit insurance gives consumers confidence that their deposits are safe, which can lead to more deposits and an increase in the money multiplier.

So, the most likely to reduce the size of the money multiplier would be an increase in cash holding by consumers.