The Fed Seldom Uses the Reserve Requirement Ratio to Influence

question 132

Multiple Choice

The Fed seldom uses the reserve requirement ratio to influence the money supply. What is the reason for this?

• A) It is difficult and costly for the Fed to monitor compliance.
• B) Frequent manipulation of reserve requirements would require bankers to constantly adjust their lending policies to changing requirements, which could be destabilizing for financial markets.
• C) The Fed would like to discourage banks from making loans indiscriminately and therefore sets just one standard.
• D) Reserves in excess of a certain amount will not be covered by the Federal Depository Insurance Corporation.

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Definitions:

Sutures

Threads or stitches used by surgeons to close wounds or surgical incisions.

Gauze Sponges

Sterile, absorbent pads made of cotton or synthetic fabric used in medical settings for wound care and absorption of fluids.

Excessive Blood

This term could refer to conditions where there is an abnormally large amount of blood within the body or an area of the body, typically relating to bleeding or hemorrhage.

Sutureless Closures

Medical techniques used to close wounds without traditional sutures, utilizing alternative materials or adhesives.