Ask Question
26 April, 02:45

Other things the same, if reserve requirements are increased, the reserve ratio a. increases, the money multiplier increases, and the money supply increases. b. increases, the money multiplier decreases, and the money supply decreases. c. decreases, the money multiplier increases, and the money supply increases. d. decreases, the money multiplier decreases, and the money supply increases.

+4
Answers (1)
  1. 26 April, 06:23
    0
    Answer: b. increases, the money multiplier decreases, and the money supply decreases

    Explanation:

    When the central bank raises the reserve requirement, the reserve ratio increase as banks will now hold more money as reserves. The Money multiplier decreases as Reserve ratio increase therefore when The reserve ratio increases the money multiplier will decrease which will then lead to a decrease in the money supply.

    When Banks hold more money because of an increased reserve requirement, Money Multiplier and Money supply will decrease because each bank will have less funds available for loans.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Other things the same, if reserve requirements are increased, the reserve ratio a. increases, the money multiplier increases, and the money ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers