A change in the reserve ratio will affect both the amount of the banking system's excess reserves and the multiple by which the system
can lend based on excess reserves.

Question

Quizplus · Accepted Answer

The reserve ratio determines the required reserve that banks must hold, and any change to this ratio will affect the amount of excess reserves that banks can hold. This, in turn, affects the amount of money that banks can lend out based on their excess reserves. Therefore, a change in the reserve ratio affects both excess reserves and the lending multiple.

A Change in the Reserve Ratio Will Affect Both the Amount