A decrease in reserve requirements could lead to an


A decrease in reserve requirements could lead to an O increase in bank lending O increase in the money supply O increase in the discount rate O increase in bank lending and an increase in the money supply. O increase in bank lending and an increase in the discount rate.

Answer

Answer is Option 4

When Federal Reserve lowers the reserve ratio through an expansionary monetary policy, commercial banks requirement of cash on hand decreases. The excess reserve released could be used to increase the number of loans that they give out to consumers and businesses. This increases the money supply in the economy.

Lower Fed reserve requirement lowers the discount rate.

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