Answer to Question #111987 in Macroeconomics for jacob

Question

A change in the required reserve ratio will impact a nation's money supply by changing the:
Group of answer choices

a. denominations of currency that are printed and available to banks.

b. amount that is held in excess reserves and the public's willingness to make deposits.

c. holdings of government bonds by the Federal Reserve and the cost of buying them.

d. size of the potential deposit multiplier and the amount that is held in excess reserves.

Answer 1

It changes amount that is held in excess reserves and the public's willingness to make deposits.(B)

In this case, two events occur. The federal can increase or decrease the reserve ratio. When it decreases, the amount that banks hold in reserves lowers, thus they are able to make more loans to lenders and businesses.