If the Federal Reserve were to decrease the reserve requirement:
A) actual reserves would increase.
B) the money multiplier would decrease.
C) the maximum amount that a bank could lend would increase.
D) the maximum amount that a bank could lend would decrease.

Question

Quizplus · Accepted Answer

Decreasing the reserve requirement means banks are required to hold less money in reserve and can lend out more of their deposits. This increases the maximum amount that a bank could lend.

If the Federal Reserve Were to Decrease the Reserve Requirement