For a given level of reserves, an increase in the reserve requirement ratio will
A) decrease legal reserves and decrease the money supply.
B) increase legal reserves and decrease excess reserves.
C) increase legal reserves and increase excess reserves.
D) increase excess reserves and increase the money supply.

Question

Quizplus · Accepted Answer

An increase in the reserve requirement ratio means banks must hold more reserves, reducing excess reserves available for lending, which can decrease the money supply.

For a Given Level of Reserves, an Increase in the Reserve