Concept:A higher cash ratio forces banks to hold more reserves, leaving less for lending.
Explanation:The cash ratio is the portion of deposits that banks must keep as reserves with the central bank.
When the central bank increases this ratio, banks are required to keep more idle cash.
As a result, banks have less money available to give out as loans.
This reduces the amount of credit banks can create.
Since loans help create deposits, less lending also reduces the overall money supply in the economy.
Therefore, an increase in the cash ratio is a contractionary monetary policy tool.
Answer:C. reduce the supply of money