Asked by Pinky Melon on May 21, 2024
Verified
One of the main purposes of the Fed's reserve requirements is to
A) provide cash flow for business firms.
B) provide sources for foreign exchange.
C) provide sources for foreign investments.
D) regulate the lending ability of member banks.
Reserve Requirements
Regulations set by central banking authorities that determine the minimum amount of reserves that banks must hold against deposits.
Lending Ability
The capacity of financial institutions to provide loans to individuals or businesses, based on available capital and regulatory constraints.
- Catalog the tools employed by the Federal Reserve for the enactment of monetary policy.
Verified Answer
KG
Kurderrious GreenMay 24, 2024
Final Answer :
D
Explanation :
The main purpose of the Fed's reserve requirements is to regulate the lending ability of member banks. By requiring banks to hold a certain percentage of deposits in reserve, the Fed can control the amount of money that banks can lend out, which in turn affects the overall money supply in the economy. This is a tool used by the Fed to help stabilize the economy and prevent inflation or recession. The other choices are not related to the purpose of reserve requirements.
Learning Objectives
- Catalog the tools employed by the Federal Reserve for the enactment of monetary policy.