In a fractional-reserve banking system,an increase in reserve requirements
A)increases both the money multiplier and the money supply.
B)decreases both the money multiplier and the money supply.
C)increases the money multiplier,but decreases the money supply.
D)decreases the money multiplier,but increases the money supply.

Question

Quizplus · Accepted Answer

An increase in reserve requirements means that banks will need to hold a higher percentage of deposits in reserve, reducing the amount of money that can be loaned out and thus decreasing both the money multiplier and the money supply.

In a Fractional-Reserve Banking System,an Increase in Reserve Requirements