Series 52: 7.4.2.3. Reserve Requirements

Taken from our Series 52 Online Guide

7.4.2.3. Reserve Requirements

The Fed also implements monetary policy through manipulating reserve requirements. A reserve requirement is the amount of funds depository institutions, such as banks, are required to hold in reserve against deposits made by their customers.

To grow the economy, the Fed lowers the reserve requirements, allowing banks to lend out more money. Americans then have more money available to invest and spend. This stimulates the economy but can also ca

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