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 securities held by the Central Banks
ratio of coins to paper currency in the economy
amount of actual reserves in the banking system
amount of excess reserves in the banking system
number of government securities held by the Central Banks
ratio of coins to paper currency in the economy
Answers
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 keep fewer reserves relative to their deposits, allowing them to lend more money, which increases the amount of excess reserves available in the banking system. This can lead to more money being created through the lending process.
**amount of excess reserves in the banking system.**
When the reserve ratio is lowered, banks are required to keep fewer reserves relative to their deposits, allowing them to lend more money, which increases the amount of excess reserves available in the banking system. This can lead to more money being created through the lending process.