An increase in the reserve ratio would be an example of

Question

Quizplus · Accepted Answer

An increase in the reserve ratio would lead to a decrease in the amount of money that banks can lend out, thereby reducing the money supply. This reduction in the money supply is consistent with contractionary monetary policy, making D the correct answer. Expansionary monetary policy is associated with increasing the money supply, which would not occur with an increase in the reserve ratio. Fiscal policy involves government spending and taxation and is therefore not related to changes in the reserve ratio.

An Increase in the Reserve Ratio Would Be an Example