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When the required reserve ratio is raised, banks must loan out a smaller portion of their reserves, resulting in fewer loans.

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Brandy Sipes

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3y ago

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What accurately describes how raising the required reserve ratio reduces the money supply?

When the required reserve ratio is raised, banks must loan out a smaller portion of their reserves, resulting in fewer loans.


What accurately describes how raising the required reserve ratios reduces the money supply?

When the required reserve ratio is raised, banks must loan out a smaller portion of their reserves, resulting in fewer loans.


What describes how lowering the required reserve ratio reduces the money supply?

When the required reserve ratio is lowered, banks can loan out more money.


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What best explains why raising he required reserve ratio results in a decrease in the money supply?

Raising the required reserve ratio means that banks must hold a larger percentage of deposits as reserves and can lend out less money. This reduces the amount of money available for loans and, consequently, decreases the overall money supply in the economy. With fewer loans being issued, there is less money circulating, which can lead to tighter credit conditions and potentially slow down economic activity.


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When fixed assets reduces it also reduces the breakeven point because now less number of units required to fulfill the fixed cost.


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