When the reserve requirement is increased the?

Answer 1

When the reserve requirement is increased, banks are required to hold a larger percentage of their deposits as reserves, which reduces the amount of money they can lend out. This can lead to a decrease in the money supply in the economy, potentially slowing down economic growth. Higher reserve requirements can also result in higher interest rates, as banks may need to charge more for loans to maintain profitability. Overall, this policy is often used to combat inflation and stabilize the economy.