Question

if the reserve requirements were raised, what would be the effect on the money supply?
o the money supply would decrease.
o the money supply would increase.
o the money supply would suffer from inflation.
o the money supply would stay the same.

Explanation:

Reserve requirements are the portion of deposits that banks must hold as reserves. When reserve requirements are raised, banks have to hold more of their deposits as reserves and can lend out less. Since the money - creation process is based on banks' lending activities, less lending means less money creation, resulting in a decrease in the money supply.

Answer:

The money supply would decrease.