A decrease in the reserve ratio increases the
A) amount of actual reserves in the banking system.
B) amount of excess reserves in the banking system.
C) number of government securities held by the Federal Reserve Banks.
D) ratio of coins to paper currency in the economy.

Question

Quizplus · Accepted Answer

A decrease in the reserve ratio means that banks are required to hold less reserves against their deposits. This means that they have more excess reserves available to lend out, increasing the amount of excess reserves in the banking system.

A Decrease in the Reserve Ratio Increases the