A decrease in reserve requirements could lead to a(n)
A) Increase in bank lending
B) Increase in the money supply
C) An decrease in the discount rate
D) All above
ESSAY QUESTIONS

Question

Quizplus · Accepted Answer

A decrease in reserve requirements means that banks are required to hold less money in reserve. This means that they have more money available to lend out, which can lead to an increase in bank lending. An increase in bank lending can lead to an increase in the money supply, as more money is being circulated in the economy. A decrease in reserve requirements can also lead to a decrease in the discount rate, as the central bank may lower the discount rate to encourage banks to borrow more money and lend it out.

A Decrease in Reserve Requirements Could Lead to A(n)