Economics Question

[lunarlev]

  Just had my econs paper today. I felt very startled when I came across this question as there was no answer with the combination I had figured out

Comments

[miak]

it should be C.

the bank's reserve remains the same, but because the required ratio is lowered, they can lend more, so money supply increases.

but dun take my word for it. it's been a long time since i took econs, and i am not that strong in macroeconomics.

[lunarlev]

Yes, I know money supply increases. BUt then, since bank reserve decreases, it increases or remains constant?

[miak]

like i said earlier, it remains the same.

the banks don't need to do anything to the reserves.

[lunarlev]

hmm. ok

[xiaogou]

i'm not an econ major, but i think the answer is C?

[lunarlev]

I know its either C or D.. Just not too sure