Which of the following best explains why raising the required reserve ratio
results in a decrease in the money supply?
o
a. when the required reserve ratio is high, banks must loan out a
smaller portion of their reserves, resulting in fewer loans.
o
b. when the required reserve ratio is high, banks have less incentive
to give loans because they make less profit on these loans.
o
c. when the required reserve ratio is high, the inflation rate goes up
and people spend less money.
o
d. when the required reserve ratio is high, banks charge higher
interest rates that make loans less affordable to many people