In the money creation process, the simple money multiplier assumes that banks hold no excess reserves. What is the consequence of a bank holding excess reserves?

If banks hold excess reserves, then the money multiplier will be smaller.

Explanation:

It is easier to understand using an example:

required reserve rate = 5%

money multiplier = 1 / 5% = 20

if $100 are injected in to the economy and they are deposited in the banking system, the money supply will increase by $100 x 20 = $2,000. But this calculation only works if banks lend 100% of the loanable funds, but if instead banks only lend $90, instead of $95 ($100 x 95%), then the money multiplier will be 1 / 10% = 10. In this case, the money supply will only increase by half

d, conspicuous consumption is when you try to increase your wealth or social status (and in the case he's trying to create the perception of wealth considering he can't really afford it)

a. primarily outdoors, responding to emergencies and protecting people.

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