Can you describe the effect each action below will have on the money supply?

Question

Can you describe the effect each action below will have on the money supply? Help please!

A. Banks decide to keep more of their assets as reserves in order to avoid risking a shortage of the required reserve.

Answer 1

If banks keep more money in reserves, this increases the required reserve ratio. An increased RRR leads to a lower money supply since more money is being kept in reserves.

Answer 2

To my knowledge, the reserves kept by banks are dictated by bank examiners when they deem that loans are at risk.

They then require that the banks place the balance of those loans in reserve.  

They cannot loan those reserves, which affect interest income.

Banks loan all other funds in order to earn interest.

This includes morgtages, car loans, business loans, all of which are collaterilized/secured loans.

Credit cards and personal loans are unsecured.  No assets to back the loans.

I would think that banks have to hold some reserves for unsecured loans, as well as high risk loans.

These reserves would have some effect on the availability of funds that can be loaned.

When bank examiners feel that the bank cannot cover all their high risk loans, the bank may be declared insolvent and closed.

I had a bank close when the officers misused funds and held excessive bad loans.  Fraud was involved among the officers.

Answer 3

A. should reduce the money supply.