Which of the following is true regarding the reserve requirements?
A) The Fed changes them frequently because they are a power monetary policy tool.
B) The Fed does not change them much at all because taxation is a more impactful monetary policy tool.
C) The Fed changes them frequently because doing so simplifies banking operations.
D) The Fed does not change them much at all because doing so would make banking operations difficult.

Question

Quizplus · Accepted Answer

The Federal Reserve rarely changes reserve requirements because such changes can significantly disrupt banking operations and the broader economy. Instead, the Fed typically uses other tools like open market operations and the discount rate to implement monetary policy.

Which of the Following Is True Regarding the Reserve Requirements