China's Increase in Reserve Requirements. The Chinese government purchased U. dollars in the foreign exchange market with Chinese currency.

​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. The effect of the Chinese​ government's purchase of U.S. dollars in the foreign exchange market with Chinese currency would be to (decrease or increase} the supply of Chinese currency.