Changes in reserve requirements to conduct monetary policy is generally not a good idea for the United States because:

A) it requires approval of Congress and this can take too long.

B) it takes a long time to work whereas other tools are much quicker.

C) this tool is powerful and makes it difficult for bank managers to plan for the future and manage funds as they like.

D) the United States is too large of a country to use this tool.

Question

Business

Emery Romero

23 April, 15:38

Changes in reserve requirements to conduct monetary policy is generally not a good idea for the United States because:

A) it requires approval of Congress and this can take too long.

B) it takes a long time to work whereas other tools are much quicker.

C) this tool is powerful and makes it difficult for bank managers to plan for the future and manage funds as they like.

D) the United States is too large of a country to use this tool.

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Answers (1)

Know the Answer?

Faith Mccarthy · Answer 1

Answer: this tool is powerful and makes it difficult for bank managers to plan for the future and manage funds as they like.

Explanation:

Reserve requirements are the amount of money that a bank holds in its reserve to ensure that it can meet liabilities in the case of sudden withdrawals. The reserve requirement is a tool that is used by the central bank of a country to either increase or decrease the money supply in the economy and also influence interest rates.

The changes in reserve requirements to conduct monetary policy is not a good idea for the United States because it is a powerful tool which makes it hard for bank managers to make future plans and manage funds as they want. In a situation whereby small variation in the reserve ratio brings about huge changes in an economy, the changes are positive and okay but in a situation whereby they bring about negative effect, it will be hard to face such scenarios.