When the Fed lowers the required reserve ratio, the banks' excess reserves ________ and the money supply ________.

Question

Quizplus · Accepted Answer

When the Fed lowers the required reserve ratio, banks are required to hold less money in reserve and can lend out more. This leads to an increase in excess reserves, which in turn increases the amount of money that banks can lend out. As a result, the money supply increases.

When the Fed Lowers the Required Reserve Ratio, the Banks