If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__________ in the money supply.
A) excess reserves; vault cash; increase
B) reserves; vault cash; decrease
C) reserves; excess reserves; increase
D) reserves; required reserves; increase
E) none of the above

Question

Quizplus · Accepted Answer

Lowering the required reserve ratio increases excess reserves without changing the total reserves. This enables banks to issue more loans, thereby increasing the money supply.

If the Fed Lowers the Required Reserve Ratio,__________ in the Banking