Question: Suppose the Fed raises the required reserve ratio, a move that is normally thought to reduce the money supply. However, banks find themselves with a

Suppose the Fed raises the required reserve ratio, a move that is normally thought to reduce the money supply.

However, banks find themselves with a reserve deficiency after the required reserve ratio is increased and are likely to react by requesting a loan from the Fed. Does this action prevent the money supply from contracting as predicted?

Explain your answer.

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