If the Fed decreases the reserve requirement from 10% to 5%, the money multiplier will _____ and the money supply will most likely _____.

Name: If the Fed decreases the reserve requirement from 10% to 5%, the money multiplier will _____ and the money supply will most likely _____.
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Question

Quizplus · Accepted Answer

Decreasing the reserve requirement means banks can lend out more money, thereby increasing the money multiplier, which eventually results in an increase in the money supply. Therefore, the correct choice is D.

If the Fed Decreases the Reserve Requirement from 10% to 5