A lowering of the required reserve ratio might not expand the money supply if:
A) tax rates are also lowered at the same time.
B) tax rates are increased at the same time.
C) borrowers are unwilling to borrow the new funds the banks have available for loans.
D) borrowers are willing to borrow the new funds the banks have available for loans..
E) borrowers expand their borrowing because of the lower interest rates that banks offer.

Question

Quizplus · Accepted Answer

A lowering of the required reserve ratio allows banks to lend out more money and thus expand the money supply. However, if borrowers are unwilling to borrow the new funds available for loans, then the expansion of the money supply will not occur.

A Lowering of the Required Reserve Ratio Might Not Expand