Other things being equal, when the Fed raises the reserve requirement, the banking system's excess reserves fall, the deposit expansion multiplier declines, and the money supply decreases.

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When the Fed raises the reserve requirement, banks are required to hold a higher percentage of deposits as reserves. This means they have less excess reserves to lend out, which decreases the deposit expansion multiplier. As a result, the money supply decreases.

Other Things Being Equal, When the Fed Raises the Reserve