_____________ can be altered to change the lending capacity of the banking system.

Question

Quizplus · Accepted Answer

The reserve requirement refers to the percentage of deposits that banks are required to hold in reserve, either in their vaults or with a central bank. By altering the reserve requirement, the lending capacity of the banking system can be changed. If the reserve requirement is lowered, banks are able to hold less money in reserve and can then increase lending, thereby increasing the money supply. If the reserve requirement is raised, banks must hold more money in reserve, which limits their ability to lend and decreases the money supply. A and B do not directly impact the lending capacity of the banking system.

_____________ Can Be Altered to Change the Lending Capacity of the Banking