AP Macroeconomics Question 175: Answer and Explanation
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14. Lowering reserve requirements would
- A. force banks to hold more reserves and make more loans.
- B. allow banks to make more loans and buy more investments thus decreasing the money supply.
- C. allow banks to make more loans and buy more investments thus increasing the money supply.
- D. allow banks more freedom to merge and acquire other businesses.
- E. force banks to sell investments so that fewer funds are held in reserve.
Correct Answer: C