Question

A decrease in the reserve ratio increases the:


amount of actual reserves in the banking system


amount of excess reserves in the banking system


number of government bonds held by the Reserve Bank


ratio of coins to paper currency in the economy
GPT-4o mini
A decrease in the reserve ratio increases the **amount of excess reserves in the banking system**.

When the reserve ratio is lowered, banks are required to hold a smaller percentage of deposits as reserves. This means they have more funds available to lend out, which increases the amount of excess reserves. As banks lend more, it can lead to an increase in the overall money supply in the economy.

Related Questions

Suppose that the reserve ratio is .25, ad that a bank has actual reserves of $15,000, loans of $40,0... Excess reserves refer to the difference between a bank's vault cash and its reserves deposited... Excess reserves refer to the difference between a bank's vault cash and its reserves deposited... A decrease in the reserve ratio increases the: amount of actual reserves in the banking system...