If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, 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 decrease.
C. both the money multiplier and the supply of money in the economy will increase.
D. the money multiplier will decrease and the supply of money in the economy will increase.
Answer:C
If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, 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 decrease. C. both the money multiplier and the supply of money in the economy will increase. D. the money multiplier will decrease and the supply of money in the economy will increase.
Explanation: Type: Multiple Choice