An increase in the reserve requirement
A)increases the money multiplier and increases the money supply.
B)reduces the money multiplier and reduces the money supply.
C)increases the money multiplier and reduces the money supply.
D)none of these.

Question

Quizplus · Accepted Answer

Increasing the reserve requirement reduces the amount of money that banks can lend out, which reduces the money multiplier and ultimately reduces the money supply.

An Increase in the Reserve Requirement