The money-creating ability of the banking system may be lowered by:

Question

Quizplus · Accepted Answer

An increase in the reserve requirement would lead to a decrease in the amount of money banks can lend out and thus lower their money-creating ability. This is because banks must hold a portion of their deposits as reserves, and if the reserve requirement is increased, banks must hold more of their deposits in reserve, leaving less available to lend out. Choices A, B, C, and D would not necessarily lower the money-creating ability of the banking system.

The Money-Creating Ability of the Banking System May Be Lowered