China’s Increase in Reserve Requirements. The Chinese government purchased U.S. dollars in the foreign exchange market with Chinese currency. During the same period, the Chinese sharply raised the...

China’s Increase in Reserve Requirements. The Chinese government purchased U.S. dollars in the foreign exchange market with Chinese currency. During the same period, the Chinese sharply raised the reserve requirement on banks because they wanted to prevent the money supply from expanding too rapidly. Explain carefully how these two actions, taken together, could keep the supply of money in China from increasing