An increase in the reserve ratio would tend to
A)increase excess reserves and raise the money multiplier.
B)decrease excess reserves and decrease the money multiplier.
C)increase excess reserves and decrease the money multiplier.
D)decrease excess reserves and raise the money multiplier.

Question

Quizplus · Accepted Answer

An increase in the reserve ratio means that banks are required to hold a larger percentage of their deposits in reserve, which leaves them with less excess reserves. This decrease in excess reserves leads to a decrease in the money multiplier.

An Increase in the Reserve Ratio Would Tend to