If the central bank implements an expansionary monetary policy by lowering the reserve requirement, the immediate effect on the money supply will be:

CA Foundation · Business Economics · MTP · January 2025
If the central bank implements an expansionary monetary policy by lowering the reserve requirement, the immediate effect on the money supply will be:
(A) A. A decrease in the money supply
(B) B. An increase in the money supply
(C) C. No change in the money supply
(D) D. A reduction in interest rates without affecting money supply

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. An increase in the money supply

Topics: Money Market

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