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As the required reserve ratio __________, the maximum change in the money supply __________, ceteris paribus. As banks increase the (amount of) excess reserves they lend, the actual change in the money supply __________, ceteris paribus. falls; rises; falls falls; rises; rises. rises; rises; rises. rises; falls; falls

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Final answer:

The maximum change in the money supply decreases as the required reserve ratio increases, and rises when this ratio is decreased. Additionally, the actual change in the money supply rises as banks lend more of their excess reserves.

Step-by-step explanation:

As the required reserve ratio increases, the maximum change in the money supply decreases, ceteris paribus. This is because banks have less money available to lend since they are required to hold a greater amount in reserves. Conversely, when the required reserve ratio decreases, banks have a greater amount of money available to lend, which increases the maximum potential change in the money supply.

Moreover, as banks increase the amount of excess reserves they lend, the actual change in the money supply rises, ceteris paribus. This is due to the multiplier effect where each new loan can create more money as it is deposited and a portion is lent out again by the receiving bank.

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