Describe how each of the following can affect the money supply:

(a) The central bank

(b) banks

(c) depositors.

The effect on the money supply is as follows:

(a) The financial institution: The central bank can affect the provision of cash through the open market operations which change the nonborrowed monetary base. The bank affects the monetary base and hence the provision of cash by the problem of loans to the financial institutions which increases the borrowed reserves.

(b) Banks: The banks can affect the money supply by the way of holding the reserves which are in excess. When there are fewer reserves within the bank the amount of loans of the bank's increases, which shows a rise within the monetary resource.

(c) Depositors: The depositors can influence the money supply through the holdings of currency versus deposits. a better ratio of currency deposit ends up in a lower money multiplier and hence a lower supply for the given monetary base.