Decreasing the reserve requirement:
A) reduces excess reserves and the money supply.
B) increases excess reserves and the money supply.
C) reduces excess reserves and increases the money supply.
D) increases excess reserves and reduces the money supply.

Question

Quizplus · Accepted Answer

Decreasing the reserve requirement allows banks to hold less money in reserve and lend out more, thereby increasing excess reserves and the money supply.

Decreasing the Reserve Requirement