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:

Communication

The process of transferring information, ideas, thoughts, feelings, and messages from one person or group to another.

Active Listening

A communication technique that involves giving full attention to the speaker, understanding their message, and responding thoughtfully.

Responding Stage

A phase in communication or interaction where feedback or reaction to a message or action is provided.

Effective Communication

The successful exchange of information between individuals or groups, ensuring the message is received and understood as intended.