Everything else hed constant,an increase in the required reserve ratio on checkable deposits causes the M1 money multiplier to ________ and the money supply to ________.

Question

Quizplus · Accepted Answer

An increase in the required reserve ratio on checkable deposits reduces the ability of banks to create new loans and hence, the M1 money multiplier decreases. Consequently, the money supply also decreases.

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