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If the reserve rate were raised, banks would be required to hold a larger percentage of their deposits as reserves, reducing the amount of money available for lending. This could lead to tighter credit conditions, resulting in higher interest rates and decreased borrowing by consumers and businesses. Consequently, economic growth may slow down, as both spending and investment could decline due to the increased cost of borrowing. Additionally, the reduced money supply could help control inflation, but it may also lead to a slowdown in overall economic activity.

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2d ago

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