The reserve requirement is the tool used least frequently by the Fed because it can cause abrupt changes in the money supply.

Question

Quizplus · Accepted Answer

The reserve requirement is a tool that the Fed can use to control the money supply by changing the amount of reserves that banks are required to hold. However, the Fed tends to use this tool less frequently because it can have a significant impact on the money supply, and can potentially cause abrupt changes in the economy. Instead, the Fed typically relies on other tools such as open market operations and adjusting interest rates to achieve its monetary policy goals.

The Reserve Requirement Is the Tool Used Least Frequently by the Fed