In the market for bank reserves, a reduction in the required reserve ratio will cause

Question

Quizplus · Accepted Answer

A reduction in the required reserve ratio will decrease the amount of reserves that banks are required to hold, leading to an increase in the supply of reserves. This, in turn, will decrease the federal funds rate, as banks will have more reserves to lend to each other. Additionally, the decrease in required reserves will increase the equilibrium quantity of reserves as well as reduce the demand for reserves. Therefore, all of the above options are correct.

In the Market for Bank Reserves, a Reduction in the Required