A one percentage point change in the required reserve ratio would change the money supply by roughly 1 percent, other things being equal.

Question

Quizplus · Accepted Answer

The money supply is affected by the reserve ratio through the money multiplier effect, not a direct one-to-one percentage change. A change in the reserve ratio alters the amount banks can lend, impacting the money supply by more than the change in the ratio itself.

A One Percentage Point Change in the Required Reserve Ratio