A decrease in the required reserve ratio would be
A) a restrictive policy because it lowers the amount of total reserves in the banking system.
B) a restrictive policy because it lowers the amount of excess reserves in the banking system.
C) an expansionary policy because it raises the amount of required reserves in the banking system.
D) an expansionary policy because it raises the amount of total reserves in the banking system
E) an expansionary policy because it raises the amount of excess reserves in the banking system.

Question

Quizplus · Accepted Answer

A decrease in the required reserve ratio increases excess reserves, allowing banks to lend more, which is expansionary.

A Decrease in the Required Reserve Ratio Would Be