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Less money in the economy.
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Which of these is a result of a low reserve requirement?
more bank lending and more money in the economy
What is the result of lowering the reserve requirement?
the mooney supply will go down because the feds do not make any money
If the federal reserve increases the reserve requirement what effect will this have on the nations money supply?
If the Federal Reserve increases the reserve requirement, banks must hold a larger percentage of their deposits as reserves and can lend out less money. This reduction in lending capacity typically leads to a decrease in the overall money supply in the economy. Consequently, it can result in tighter credit conditions, potentially slowing economic growth and increasing interest rates.
What is the purpose the reserve requirement?
It protects public deposits.
Decreasing the reserve requirement will?
will discourage aggregate demand.
If the Federal Reserve decreases the reserve rate from 4 to 2 how does this affect the amount of money that would result because of fractional-reserve banking from an initial deposit into a bank of 55?
If the Federal Reserve decreases the reserve requirement from 4% to 2%, banks can lend out a greater portion of their deposits. For an initial deposit of $55, with a 2% reserve requirement, the bank must hold $1.10 in reserve and can lend out $53.90. This increase in lending capacity allows for a larger money supply through the money multiplier effect, which, in this case, can significantly amplify the total amount of money created through subsequent deposits and lending.
How can the reserve requirement for banks be used to slow the economys growth?
Increasing the reserve requirement for banks will make less money available to borrowers and thus slow the economy's growth.
Why did the Members banks must leave this with the Fed?
Reserve requirement
In reference to federal reserve policy what are reserve requirement?
the percentage of a bank's total deposits that must be kept in its possession
What term indicates the percentage of a banks total deposit that must be kept in its own vaults?
reserve ratio
What is the relationship between the monetary multiplier and reserve ratios?
Money Multiplier is inverse of Reserve Requirement. That is, m = 1/R
What term indicates the percentage of banks total deposit that must be kept in its own vaults?
reserve ratio
