The Fed Changes the Reserve Requirement Sparingly Because

question 138

Multiple Choice

The Fed changes the reserve requirement sparingly because:

• A) very small changes cause very large overall changes to money supply due to the money multiplier.
• B) it would cause uncertainty for banks and slow their rate of lending.
• C) sudden changes of such a huge magnitude would have far-reaching, and sometimes undesirable, effects.
• D) All of these are true.

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Definitions:

Illegal Trade

The exchange of goods or services that is forbidden by law, regulations, or treaty.

Representative Government

A system of governance where citizens elect officials to represent their interests in a legislative or decision-making body.

Colonial Americans

Individuals living in the American colonies before the United States declared independence from Britain, including both European settlers and Indigenous peoples.

Colonial Assembly

A legislative body in a colony, primarily in the British colonies, which represented the colonists and had some powers over local matters and legislation.