Everything else held constant,an increase in the required reserve ratio will mean ________ in the M2 money multiplier and ________ in the M2 money supply.

Question

Quizplus · Accepted Answer

An increase in the required reserve ratio means banks must hold more reserves and can lend out less of each deposit, which decreases the M2 money multiplier. With a lower multiplier, less money is created through the banking system, leading to a decrease in the M2 money supply.

Everything Else Held Constant,an Increase in the Required Reserve Ratio