Question

If the central bank increases the amount of reserves banks are required to hold to 20%, then?

Answer 1

If the central bank increases the amount of reserves banks are required to hold to 20%, then: both the money multiplier and supply of money in the economy will decrease.

What are the Functions of central bank?

The central bank oversees and manages the nation's foreign exchange while also serving as the technical advisor to the government on matters related to foreign currency policy. The central bank's role is to prevent volatility in foreign exchange rates and to promote stability. Implementing monetary policy and managing the money supply are the responsibilities of central banks, which are frequently tasked with preserving low inflation and steady GDP growth. To manage the cost of borrowing and lending across an economy, central banks have an impact on interest rates and take part in open market activities.

An organisation that controls a state's or formal monetary union's commercial banking system and regulates its currency and monetary policy is known as a central bank, reserve bank, or monetary authority. A central bank has the exclusive right to expand the monetary base, unlike a commercial bank.

Hence, If the central bank increases the amount of reserves banks are required to hold to 20%, then: both the money multiplier and supply of money in the economy will decrease.

To learn more about central bank refer to:

brainly.com/question/25711082

#SPJ4