When the Federal Reserve notifies banks that they must hold fifteen cents for every dollar that is deposited, it is controlling the money supply by using which of the following tools?
A) reserve requirements ratio
B) risk
C) discount rate
D) open market operations
E) unable to tell with the information provided

Question

Quizplus · Accepted Answer

The Federal Reserve controls the money supply by setting the reserve requirements ratio, which dictates the percentage of deposits that banks must hold in reserve and cannot lend out.

When the Federal Reserve Notifies Banks That They Must Hold