Question

1. If the Fed were to impose a slight increase in the required reserves ratio, there would be _____.

an increase in the money supply
no change in the money supply
an increase, then a decrease, in the money supply
a decrease in the money supply

Answer 1

If the Fed were to impose a slight increase in the required reserves ratio, there would be "a decrease in the money supply," since banks would have to keep more money on reserve.

Answer 2

Correct answer choice is:

D. A decrease in the money supply

Step-by-step explanation:

The Required Reserve quantitative relation is that the percentage/fraction of needed reserves that ought to control for each dollar of deposits in an exceeding facility establishment that's needed by the Federal Reserve. The reverse is going to be true once cash in hand decreases. That's a decrease within the cash in hand can cause a decrease in the quantity of cash that folks and corporations can hold and as a result, they're going to pay less. this can cause aggregate demand to decrease.