The reserve requirement does not meet all of the criteria of a good monetary policy tool, because it: ?

Question

The reserve requirement does not meet all of the criteria of a good monetary policy tool, because it: ?

Quizplus · Accepted Answer

The reserve requirement cannot be quickly changed, as it requires a change in regulations and coordination with banks. This limits its effectiveness as a monetary policy tool, as it cannot be adjusted in a timely manner to respond to changes in the economy. However, the reserve requirement is controllable and observable, and its impact on the economy is predictable.

The Reserve Requirement Does Not Meet All of the Criteria