If the central bank increases the amount of reserves banks are required to hold to 20%, then:
A. the money multiplier will increase and the supply of money in the economy will decrease.
B. both the money multiplier and the supply of money in the economy will increase.
C. the money multiplier will decrease and the supply of money in the economy will increase.
D. both the money multiplier and supply of money in the economy will decrease.
Answer:D
If the central bank increases the amount of reserves banks are required to hold to 20%, then:
A. the money multiplier will increase and the supply of money in the economy will decrease. B. both the money multiplier and the supply of money in the economy will increase. C. the money multiplier will decrease and the supply of money in the economy will increase. D. both the money multiplier and supply of money in the economy will decrease.
Explanation: Type: Multiple Choice