AP Macroeconomics Question 175: Answer and Explanation

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Question: 175

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

Explanation:

(C)