If the Federal Reserve lowered the reserve requirements imposed on the banking industry, which of the following will most likely happen in the short run?

Question

Quizplus · Accepted Answer

Lowering reserve requirements means that banks can use more of their deposits to make loans, increasing the supply of loanable funds. This will exert downward pressure on interest rates as banks compete to lend out their excess funds. Option A is incorrect because a higher demand for loanable funds would result in higher interest rates, not lower. Option C is unrelated to the question and Option D is unlikely to be affected by reserve requirements.

If the Federal Reserve Lowered the Reserve Requirements Imposed on the Banking