If the Central Bank Lowered the Reserve Requirement, What Happens

question 194

Multiple Choice

If the central bank lowered the reserve requirement, what happens to the money multiplier and the money supply?

• A) The money multiplier increases, but the money supply decreases.
• B) The money multiplier decreases, but the money supply increases.
• C) The money multiplier and the money supply both increase.
• D) The money multiplier and the money supply both decrease.

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Definitions:

Due Date

The specified date by which a payment must be made, or a task or assignment must be completed.

Defined Contribution Plan

A pension plan that requires a fixed amount of money to be invested on the employee’s behalf during the employee’s working years.

Annual Pension Benefit

The amount a retiree receives yearly from their pension plan, which is based on factors such as salary history and years of service.

Defined Benefits Plan

A type of pension plan where the benefits that the employee will receive upon retirement are defined in advance.