A reduction in the reserve deposit ratio,θ,will most likely have which of the following effects?

Name: A reduction in the reserve deposit ratio,θ,will most likely have which of the following effects?
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Quizplus · Accepted Answer

A reduction in the reserve deposit ratio increases the money supply, which lowers interest rates and increases investment and consumption. This is represented by a downward shift in the LM curve, as it becomes easier to obtain money at lower interest rates, stimulating economic activity.

A Reduction in the Reserve Deposit Ratio,θ,will Most Likely Have