Required reserve ratio 儲備率

Tools to control money supply (2)
控制貨幣供應方案（二）
Required Reserve Ratio 儲備率

#Definition: The required reserve ratio is the minimum fraction of deposits that banks are required to keep as reserves.

Situation I: 
When required reserves decreases...
當儲備率減少
a) *Multiplier increases
倍數增大 (*Multiplier = reciprocal of RR)
b) Banks keep less required reserves
銀行需要的儲備減少
c)Excess reserves increases for loans
多餘的儲備可以用作貸款
d) Money supply increases
貨幣供應增多

Paragraph in complete sentences:
When the central bank lowers the required reserve ratio, banks need to keep less required reserves. So they have more excess reserves to loan out for profits. This results in multiple creation of money. Hence, money supply increases.

Situation II: 
When required reserves increases...
當儲備率增高
a) *Multiplier decreases
倍數減少 (*Multiplier = reciprocal of RR)
b) Banks keep more required reserves
銀行需要的儲備增多
c)Excess reserves decreases for loans
可用作貸款的儲備減少
d) Money supply decreases
貨幣供應大減

Paragraph in complete sentences:
When the central bank raises the required reserve ratio, banks need to keep more required reserves. So they have less excess reserves to loan out for profits. Multiple creation of money cannot be resulted. Hence, money supply decreases.

SUMMARY

When the central bank lowers (raises) the required reserve ratio, the money supply increases (decreases).
儲備率升 貨幣供應減