1. Say that the government announces that it will increases taxes on deposits. In response to this policy, households in the economy decide to withdraw some of their deposits from their banks and hold cash instead. Which of the following is true:
3. Whether the money supply increases or decreases overall depends on the size of the tax
4. The money supply will decrease
5. None of the above/below is true
6. The money supply will increase
7. There is no effect on the money supply, only the Central Bank can change the money supply