If the Federal Reserve increases the reserve requirement,
A) the value of the money multiplier will increase.
B) the value of the money multiplier will decrease.
C) the value of the autonomous spending multiplier will increase.
D) the value of the autonomous spending multiplier will decrease.

Question

Quizplus · Accepted Answer

When the Federal Reserve increases the reserve requirement, banks are required to hold more reserves and can lend out less of their deposits. This reduces the money multiplier, which is the amount of money that can be created in the banking system for each dollar of reserves.

If the Federal Reserve Increases the Reserve Requirement