The large increase in the excess reserves held by the commercial banking system during the second half of 2008,
a. increases the likelihood of a sharp contraction in the money supply, which would increase the length and severity of the recession.
b. increases the likelihood of a rapid increase in the money supply, potentially leading to future inflation.
c. is merely a continuation of the trend present since 1990.
d. reduces the ability of banks to extend additional loans.
B
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