If the Fed reduces the required reserve ratio,
A)excess reserves will increase.
B)excess reserves will decrease.
C)total reserves will increase.
D)total reserves will decrease.

Question

Quizplus · Accepted Answer

If the Fed reduces the required reserve ratio, banks will be required to hold fewer reserves and can lend out more of their deposits. This will lead to an increase in excess reserves, which are the reserves held in excess of the required amount.

If the Fed Reduces the Required Reserve Ratio