Deposit creation possibilities are greater with a larger minimum reserve requirement.

Question

Quizplus · Accepted Answer

Deposit creation possibilities are actually greater with a smaller minimum reserve requirement, as banks are able to lend out more money from the deposits they hold. A larger minimum reserve requirement would mean that banks have to hold back more of their deposits, limiting their ability to create more loans and expand the money supply.

Deposit Creation Possibilities Are Greater with a Larger Minimum Reserve