Which of the following statements about reserve requirements is true?
A) The Federal Reserve tends to not radically change reserve requirements when carrying out monetary policy.
B) A reserve requirement of at least 1 percent applies to every type of account in a financial depository institution.
C) Currently, a flat 10 percent reserve requirement applies to every account held in a financial depository institution.
D) All of the above.

Question

Quizplus · Accepted Answer

The Federal Reserve typically avoids making radical changes to reserve requirements as a tool for conducting monetary policy because such changes can be disruptive to the banking system. Reserve requirements are the minimum amount of funds that a bank must hold in reserve against deposits. Adjusting these requirements can influence the amount of money banks can lend and thus affect the money supply. However, due to the potential for significant impact on the banking system, the Federal Reserve often prefers using other tools, such as open market operations or adjusting the discount rate, for more precise and less disruptive control over the money supply.

Which of the Following Statements About Reserve Requirements Is True