If commercial banks are maintaining a 4 percent reserve/deposit ratio and the Fed raises the required reserve ratio to 6 percent, then banks will ________ their loans based on current deposits, and the money supply will ________.

Question

Quizplus · Accepted Answer

When the Fed raises the required reserve ratio, banks have less money to lend. This decreases bank lending and decreases the money supply.

If Commercial Banks Are Maintaining a 4 Percent Reserve/deposit Ratio