Consider a Policy That Decreases the Required Reserve Ratio in a Country

question 35

Multiple Choice

Consider a policy that decreases the required reserve ratio in a country such as the United States.What type of policy is this?  

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

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