Lowering the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.
A) raises; increase
B) raises; decrease
C) lowers; increase
D) lowers; decrease

Question

Quizplus · Accepted Answer

Lowering the required reserve ratio decreases the amount of reserves banks are required to hold, which increases the simple deposit multiplier. This, in turn, increases the money supply in the economy.

Lowering the Required Reserve Ratio __________ the Simple Deposit Multiplier