If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent, what would happen to the money supply?
A)It would decrease.
B)It would increase.
C)It would remain unchanged.
D)It depends on the value of interest rates.

Question

Quizplus · Accepted Answer

When the Fed raises the reserve requirement, banks are required to hold a higher percentage of their deposits in reserve, which means they have less money available to lend out to customers. As a result, the money supply decreases.

If the Fed Raises the Reserve Requirement on Deposits from 15