A change in the reserve requirement affects:
A) The money multiplier and excess reserves.
B) Excess reserves and the discount rate.
C) The discount rate and the federal funds rate.
D) The money multiplier and the federal funds rate.

Question

Quizplus · Accepted Answer

A change in the reserve requirement directly affects the money multiplier because it alters the amount of money banks can create with each dollar of reserves. It also affects excess reserves, as changing the requirement changes the amount of reserves banks must hold compared to what they can lend out.

A Change in the Reserve Requirement Affects