What happens to money multiplier when currency drain increases?

Question

Banks create money by making loans using excess reserves.

If people decide to hold more money in their wallets or under their mattresses (as a proportion of all money in the economy) because of an increase in bank service fees, what would happen to the money multiplier?

A. It would increase due to a higher currency drain ratio.

B. It would decrease due to a higher currency drain ratio.

C. It would increase due to a lower currency drain ratio.

D. It would decrease due to a lower currency drain ratio.

E. It would not change.

Answer 1

'B' is right answer. Money Multiplier=1/(reserve requirement+currency drain)