The Fed Is Reluctant to Use Reserve Requirements to Control

question 114

Multiple Choice

The Fed is reluctant to use reserve requirements to control the money supply because

• A) of their overly-powerful impact on the money supply.
• B) they have the potential to create liquidity problems for banks with low excess reserves.
• C) frequent changes in reserve requirements complicate liquidity management for banks.
• D) of all of the above.
• E) of only A and B of the above.

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Definitions:

Myelin

A fatty substance that surrounds and insulates the axons of some neurons, enhancing the speed at which electrical impulses are conducted.

Axon

A long, slender projection of a nerve cell, or neuron, that typically conducts electrical impulses away from the neuron's cell body.

Neurotransmitters

Chemical substances that transmit signals across a synapse from one neuron to another in the nervous system.

Brain

The brain is the complex organ located in the skull that serves as the center of the nervous system in all vertebrate and most invertebrate animals, responsible for processing sensory information, regulating bodily functions, and enabling thought, memory, and emotion.