The introduction of mutual funds has made reserve requirements largely ineffective.

Question

Quizplus · Accepted Answer

Reserve requirements are a tool used by central banks to control the money supply by setting the minimum amount of reserves a bank must hold. Mutual funds, being investment vehicles that pool money from many investors to purchase securities, do not directly affect the effectiveness of reserve requirements, as these requirements apply to depository institutions, not investment funds.

The Introduction of Mutual Funds Has Made Reserve Requirements Largely