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The required reserve ratio, set by central banks, determines the minimum amount of reserves that commercial banks must hold against deposits. Raising the ratio decreases the amount of funds banks can lend, which can help control inflation and stabilize the economy. Conversely, lowering the ratio allows banks to lend more, stimulating economic growth during downturns. Adjusting the ratio is a tool for monetary policy to influence liquidity and manage economic conditions.
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What best describes the purpose of raising and lowering the required reserve ratio?
To manage the economy by increasing or decreasing the amount of loans being made
Which of the following can the Fed accomplish by raising or lowering the required reserve ratio?
Increase or decrease the money supply
What FED accomplish by raising or lowering the required reserve ratio?
To manage the economy by increasing or decreasing the amount of loans being made
What describes how lowering the required reserve ratio reduces the money supply?
When the required reserve ratio is lowered, banks can loan out more money.
Why is raising the required reserve ratio results in a decrease in the money supply?
When the required reserve ratio is high, banks must loan out a smaller portion of their reserves, resulting in fewer loans.
What best describes the purpose of raising and lowering the required reserve ratio?
To manage the economy by increasing or decreasing the amount of loans being made
Which of the following can the Fed accomplish by raising or lowering the required reserve ratio?
Increase or decrease the money supply
What FED accomplish by raising or lowering the required reserve ratio?
To manage the economy by increasing or decreasing the amount of loans being made
What is the effect of lowering reserve-level rates?
By the lowering of the required reserve-level rate, banks can increase the proportion of funds they are able to lend to customers.
What best describes the purpose of raising and lower the required reserve ratio?
To manage the economy by increasing or decreasing the amount of loans being made
What describes how lowering the required reserve ratio reduces the money supply?
When the required reserve ratio is lowered, banks can loan out more money.
What accurately describes how raising the required reserve reserve ratio reduces the money supply?
When the required reserve ratio is raised, banks must loan out a smaller portion of their reserves, resulting in fewer loans.
Why is raising the required reserve ratio results in a decrease in the money supply?
When the required reserve ratio is high, banks must loan out a smaller portion of their reserves, resulting in fewer loans.
What can the Fed accomplish by raising or lowering the required reserve ratio?
If they lower the ratio, banks do not have to hold as much cash (which gains no interest), the banks will attempt to loan this money out and make money, this can stimulate investment. Increase or decrease in the money supply (APEX)
What accurately describes how raising the required reserve ratio reduces the money supply?
When the required reserve ratio is raised, banks must loan out a smaller portion of their reserves, resulting in fewer loans.
What best explains why raising the required reserve ratio results in a decrease in the money supply?
When the required reserve ratio is high, must loan out a smaller portion of their reserves, resulting in fewer loans.
What accurately describes how raising the required reserve ratios reduces the money supply?
When the required reserve ratio is raised, banks must loan out a smaller portion of their reserves, resulting in fewer loans.
