A decrease in the required reserve ratio __________ the money supply; an open market purchase __________ the money supply.
A) decreases; decreases
B) decreases; increases
C) increases; increases
D) increases; decreases

Question

Quizplus · Accepted Answer

A decrease in the required reserve ratio allows banks to lend more, increasing the money supply. An open market purchase by the central bank injects money into the economy, also increasing the money supply.

A Decrease in the Required Reserve Ratio __________ the Money