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If Commercial Banks Are Maintaining a 4 Percent Reserve/deposit Ratio

Question 40

Multiple Choice

If commercial banks are maintaining a 4 percent reserve/deposit ratio and the Fed raises the required reserve ratio to 6 percent, then banks will ________ their loans based on current deposits, and the money supply will ________.


A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

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