What is an outcome of the Federal Reserve Board decreasing the reserve requirements?

A) Interest rates increase; the money supply decreases; economic activity increases.
B) Banks make fewer loans; the money supply declines; economic activity slows down.
C) Banks make more loans; the money supply increases; economic activity increases.
D) Interest rates increase; the money supply decreases; economic activity slows down.
E) The money supply decreases; economic activity slows down.

Question

Helen Moore · Accepted Answer

Final Answer : C, Explanation :  When the Federal Reserve Board decreases the reserve requirements, banks are required to hold less money in reserve, allowing them to lend out more money. This increases the money supply and can lead to increased economic activity as more loans are available for businesses and consumers.

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