It is TRUE that the money supply won't increase if banks decide not to lend out their extra reserves.
Bank reserves are the bare minimum in cash that financial organizations are required to hold in order to abide by central bank regulations.
This actual paper money must be kept by the bank in a vault on the premises or in an account with the national bank.
If banks decide not to lend out their surplus reserves, the money supply won't rise.
The quantity of assets that must be kept on hand to meet any withdrawals is known as a reserve requirement.
Legal, excess, and essential reserves are the three main types of bank reserves.
Therefore, it is TRUE that the money supply won't increase if banks decide not to lend out their extra reserves.
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