If the Fed decreases the reserve requirement,

Question

Quizplus · Accepted Answer

If the Fed decreases the reserve requirement, banks are able to lend out more money, which could lead to higher profits. This is because banks are able to collect more interest on the loans they make. Additionally, decreasing the reserve requirement is expansionary monetary policy, and is often used to stimulate economic growth, which could lead to an increase in national income in the long run. It is not necessarily a policy aimed at fighting inflation, as it could actually have the opposite effect by increasing the money supply. Market interest rates could go either way in response to a change in reserve requirements, as it depends on the current state of the economy and the Fed's other policies.

If the Fed Decreases the Reserve Requirement