Which policy would cause a reduction in both bank reserves and aggregate demand?
A) a reduction in the discount rate
B) the Federal Reserve purchasing government securities in the open market
C) a reduction in taxes
D) an increase in the reserve requirement

Question

Quizplus · Accepted Answer

An increase in the reserve requirement forces banks to hold more reserves, reducing the amount they can lend out, which decreases bank reserves and reduces aggregate demand.

Which Policy Would Cause a Reduction in Both Bank Reserves