Other things the same, if reserve requirements are decreased, the reserve ratio
A)increases, the money multiplier increases, and the money supply increases.
B)decreases, the money multiplier increases, and the money supply increases.
C)increases, the money multiplier decreases, and the money supply decreases.
D)decreases, the money multiplier decreases, and the money supply increases.

Question

Quizplus · Accepted Answer

When reserve requirements are decreased, banks are required to hold less money in reserve, which decreases the reserve ratio. This allows banks to lend out more money, increasing the money multiplier and ultimately increasing the money supply.

Other Things the Same, If Reserve Requirements Are Decreased, the Reserve