Question

An increase in the reserve requirement _____. rev: 06_20_2018 Multiple Choice increases the money supply by decreasing excess reserves and decreasing the monetary multiplier increases the money supply by increasing excess reserves and increasing the monetary multiplier decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier decreases the money supply by increasing excess reserves and decreasing the monetary multiplier

Answer 1

Answer:

decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier

Explanation:

If there is increased in the reserve requirement so there is also increase the credit cost but it would lead to a decrease in money supply through the decrease in excess reserves that result into reduction in money multiplier also there is the reduction of loan activity  

Therefore the third option is correct