Which of the following will result in a decrease in the money supply?
A) an increase in reserve requirements
B) an increase in the discount rate
C) a decrease in reserve requirements
D) both an increase in reserve requirements and an increase in the discount rate

Question

Quizplus · Accepted Answer

An increase in reserve requirements means banks must hold more reserves and can lend less, reducing the money supply. An increase in the discount rate makes borrowing from the central bank more expensive, discouraging banks from borrowing and lending, also reducing the money supply.

Which of the Following Will Result in a Decrease in the Money