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If Commercial Banks Are Maintaining a 5 Percent Reserve/deposit Ratio

Question 74

Multiple Choice

If commercial banks are maintaining a 5 percent reserve/deposit ratio and the Fed lowers the required reserve ratio to 3 percent, then banks may ________ their loans and deposits, and the money supply may ________.


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

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