what-is-the-effect-on-the-money-supply-if-the-reserve-ratio-is-decreased-from-15

Question

What is the effect on the money supply if the reserve ratio is decreased from 15% to 5%?

Accepted Answer

The money supply will increase because banks can loan out more.

Answer

The money supply will remain unchanged.

Answer

The money supply will decrease because banks will loan out less.

Answer

The money supply will decrease because banks will hold more reserves.