When the Federal Reserve Board increases the reserve requirements,the:
A)money supply declines.
B)amount of money in circulation increases.
C)amount of insurance for accounts increases.
D)checks in the system are declared invalid.
E)percentage of deposits that banks must hold in reserve declines.

Question

Quizplus · Accepted Answer

When the Federal Reserve Board increases the reserve requirements, banks are required to hold a larger fraction of deposits in reserve, which reduces the amount of money they can lend out. This decrease in lending capacity leads to a reduction in the money supply.

When the Federal Reserve Board Increases the Reserve Requirements,the