A change in the required reserve ratio will impact a nation's money supply by changing the:
A) denominations of currency that are printed and available to banks.
B) amount that is held in excess reserves and the public's willingness to make deposits.
C) holdings of government bonds by the Federal Reserve and the cost of buying them.
D) size of the potential deposit multiplier and the amount that is held in excess reserves.

Question

Quizplus · Accepted Answer

The required reserve ratio influences the potential deposit multiplier, which determines how much banks can lend out from deposited funds. A change in this ratio directly affects the amount banks must hold in reserves, thereby impacting the money supply.

A Change in the Required Reserve Ratio Will Impact a Nation's