(Answered) Question 23The Fed relies primarily on changes in the reserve requirement (the minimum amount of…

➤ How do reserve requirements change the money supply?
Raising reserve requirements reduces banks’ lendable funds and lowers the money multiplier, which contracts the money supply. Lowering requirements increases lendable reserves and expands the multiplier, supporting credit growth. In the current system, however, ample excess reserves and interest on reserves weaken the multiplier effect, so outcomes depend on bank behavior and policy rates.