How does the Federal Reserve utilize reserve requirements?(1 point)

Question

Responses

Reserve requirements are set by the Fed to regulate retirement portfolios for federal workers.
Reserve requirements are set by the Fed to regulate retirement portfolios for federal workers.

Reserve requirements are set by the Fed to encourage saving and investing by consumers and businesses.
Reserve requirements are set by the Fed to encourage saving and investing by consumers and businesses.

Reserve requirements are set by the Fed to regulate the minimum amount that a commercial bank must hold in liquid assets.
Reserve requirements are set by the Fed to regulate the minimum amount that a commercial bank must hold in liquid assets.

Reserve requirements are set by the Fed to balance the nation’s budget

Answer 1

The correct response is:

Reserve requirements are set by the Fed to regulate the minimum amount that a commercial bank must hold in liquid assets.

Reserve requirements are a tool used by the Federal Reserve to control the amount of money that banks can lend, thus affecting the money supply and overall economy.