How has the Federal Reserve (the “Fed”) used reserve requirements to benefit America’s economy?(1 point)

Question

Responses

a Reserve requirements are set by the Fed to regulate retirement portfolios for public-sector workers.

b Reserve requirements are set by the Fed to require banks to hold a minimum amount of its deposits in liquid assets.

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

d Reserve requirements are set by the Fed to balance the federal government’s budget.

Answer 1

b Reserve requirements are set by the Fed to require banks to hold a minimum amount of its deposits in liquid assets.

This benefits the economy by ensuring that banks have a certain level of reserves to cover withdrawals, reducing the risk of bank runs and maintaining stability in the financial system. It also helps control inflation and interest rates by influencing the amount of money banks can lend out.