Which of the following will be observed if the Fed raises the reserve requirement?
A)The deposit expansion multiplier will fall
B)The discount rate will decline
C)The interest rate ceilings will fall
D)Excess reserves will increase
E)Money supply will increase

Question

Quizplus · Accepted Answer

If the Fed raises the reserve requirement, banks will have to hold a larger percentage of their deposits in reserve, which reduces the amount they can lend out. This will lead to a decrease in the deposit expansion multiplier, which is the amount the money supply can increase from each dollar increase in reserves.

Which of the Following Will Be Observed If the Fed