Though a Powerful Tool, the Reserve Requirement Is Seldomly Used

question 60

Multiple Choice

Though a powerful tool, the reserve requirement is seldomly used by the Fed to control the money supply because:

• A) it causes significant disruptions in the banking system.
• B) using the reserve requirement can be inflationary.
• C) it is very difficult for the Fed to monitor the reserve requirement.
• D) it takes a long time for the policy to be implemented.

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Definitions:

Population

The total number of people inhabiting a specific area or region, often analyzed for demographic purposes.

Bicameral Legislature

A legislative body made up of two chambers or houses, typically found in federal governments and certain complex societies, to provide checks and balances within the legislative process.

Equal Representation

The principle that all groups or constituencies within a governing body should have the same number of representatives, ensuring fair and proportional representation.

Compromise

An agreement or settlement of a dispute that is reached by making concessions.