The public decides to decrease its holdings of currency and to increase its holdings of checking account funds by an equal amount. If the Federal Reserve does not take any offsetting actions, how will the money supply be affected （）
A. The money supply will decrease.
B. Although the action does not directly affect the money supply, it will reduce the excess reserves of banks and tend to indirectly reduce the money supply.
C. The action does not directly affect the money supply; it will increase the excess reserves of banks and tend to increase the money supply because banks may expand their loans.
参考答案：C
解析：
M1 is currency in circulation (coins and paper) , checkable deposits maintained in depository institutions, and travelers’ checks. An increase in excess reserves will increase the amount of loanable funds, therefore, increasing the money supply.