An increase in ________ reduces the money supply since it causes the ________ to fall.

Name: An increase in ________ reduces the money supply since it causes the ________ to fall.
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Question

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An increase in reserve requirements reduces the money supply by causing the money multiplier to fall. This is because banks are required to hold a larger fraction of deposits as reserves, leaving less available to lend out, which decreases the overall ability of the banking system to create money through lending.

An Increase in ________ Reduces the Money Supply Since It