Before 2008, an increase in reserve requirements by the Fed
A)would increase the money multiplier.
B)would increase money supply.
C)would decrease the money multiplier.
D)would decrese the amount of reserves held by banks.

Question

Quizplus · Accepted Answer

Before 2008, an increase in reserve requirements by the Fed would decrease the money multiplier. This is because banks would be required to hold a larger percentage of their deposits as reserves, which would decrease the amount of money they are able to lend out. As a result, the money supply would decrease.

Before 2008, an Increase in Reserve Requirements by the Fed