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An increase in the money supply does not affect the reserve ratio... but does increase the aggregrate reserves.

2007-12-14 15:11:03 · answer #1 · answered by Nep 6 · 0 0

The connection is the other way: when the fed changes the reserve ratio, it changes the money supply accordingly: higher reserve requirements cause tighter money (a decrease in the money supply), etc.

http://en.wikipedia.org/wiki/Reserve_requirement

2007-12-15 15:52:51 · answer #2 · answered by simplicitus 7 · 0 0

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