When reserve requirements are low, there is
A) an increase in the overall money supply.
B) less money to lend customers.
C) a reduction in the overall money supply.
D) an economic slowdown.
E) None of these answers are correct.

Question

Quizplus · Accepted Answer

When reserve requirements are low, banks are allowed to lend out a larger portion of their deposits, leading to an increase in the overall supply of money in the economy. This is because they are not required to hold as much of their deposits in reserve. Hence, option A is the correct answer.

When Reserve Requirements Are Low, There Is