Select the option(s) below that correctly characterize(s) the relationship betwe

Question

Select the option(s) below that correctly characterize(s) the relationship between the reserve ratio and the money supply. It is possible that multiple answers are correct. The money supply____ when the Federal Reserve____ the reserve ratio and____when the Federal Reserve____the reserve ratio. remains the same; increases; remains the same; decreases decreases; increases; increases; decreases increases; decreases; decreases; increases decreases; decreases; increases; increases increases; decreases; remains the same; increases increases; increases; decreases; decreases

Explanation / Answer

C


The money supply Increases when the Federal Reserve decreases the reserve ratio and decreases when the Federal Reserve increases the reserve ratio.

Makes sense cuz when the Reserve ratio (which is how much a bank has to keep before it loans out the rest) decreases there is a chance that the money supply increases because the loans that are given out would be more therefore there is a higher return. which increases money supply.

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