Final answer:
A lower reserve requirement is related to an increased money supply, as banks have more funds available for lending, boosting the amount of money in circulation.
Step-by-step explanation:
A lower reserve requirement is associated with an increased money supply. The reserve requirement is the percentage of each bank's deposits that must be held either as cash in their vault or on deposit with the central bank. When the central bank lowers the reserve requirement, banks are required to hold a smaller amount in reserves, which means they have a greater amount of money available to lend out. This increases the money supply because there will be more money circulating in the economy, as banks use their excess reserves to issue more loans. Conversely, an increase in reserve requirements would lead to a decreased money supply, as banks would have to hold more money in reserve and would have less to lend out. Reserve requirements are an important tool in monetary policy for regulating the amount of money in circulation.