The Impact of The Monetary Policy on The Economy

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On the other hand, if the RR Ratio increased, the reserve percentage will increase, which will cause the money supply to decrease to balance the market spending as well as reduce inflation. The banks ability to lend money will decrease which will results in less money supply in the market...
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" First, as with Federal Reserve purchases of securities directly from commercial banks, the purchases of the securities from the public increases the lending ability of the commercial banking system" (Brue & McConnell, 2004, pg 271). The money supply in the market will increase...
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