What effect do lower reserve requirements have on the money supply in an economy?

Lower reserve requirements mean that banks have to keep less money in reserve and can lend out more. When banks lend more money, it increases the amount of money circulating in the economy. For example, if a bank has $1 million in deposits and the reserve requirement is lowered from 10% to 5%, it can now lend out $500,000 instead of $900,000. This extra lending can help businesses grow and encourage people to spend more, boosting the economy. Overall, lower reserve requirements make it easier for banks to create money, leading to a larger money supply.