Increasing the Reserve Requirement Ratio Is

question 65

Multiple Choice

Increasing the reserve requirement ratio is

• A) a contractionary policy because it lowers the amount of total reserves in the banking system.
• B) a contractionary policy because it lowers the amount of excess reserves in the banking system.
• C) an expansionary policy because it raises the amount of excess reserves in the banking system.
• D) an expansionary policy because it raises the amount of required reserves in the banking system.

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Definitions:

Lowest Opportunity Cost

The situation where the choice made uses the least possible sacrifice of alternatives, having the minimal foregone benefits among all options.

Produce More

The act of increasing the output or quantity of goods or services produced by a company, entity, or individual.

Trade Restrictions

Government-imposed limitations on the free exchange of goods and services between countries.

Unilaterally

Acting or done by one side alone without agreement or consultation with others.