An increase in the reserve requirement increases reserves and decreases the money supply.

a. true

b. false

Question

Business

August Nixon

20 September, 01:25

An increase in the reserve requirement increases reserves and decreases the money supply.

a. true

b. false

+4

Answers (1)

Know the Answer?

Jillian Choi · Answer 1

This is true. An increase in the reserve requirement is put in place to prevent inflation. This is what you call a contractionary policy or a restrictive monetary policy. When this happens, the amount of reserves increases and the money supply decreases because liquidity is reduced.

An increase in the reserve requirement increases reserves and decreases the money supply.a. trueb. false

An increase in the reserve requirement increases reserves and decreases the money supply.

a. true

b. false