If the Federal Reserve wants to expand reserves in the banking system, it will A. sell government securitiesB. raise reserve requirements. C. purchase government securities D. raise the discount rate

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Social Studies

Tristen Murray

18 April, 20:25

If the Federal Reserve wants to expand reserves in the banking system, it will A. sell government securitiesB. raise reserve requirements. C. purchase government securities D. raise the discount rate

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Answers (1)

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Miriam Douglas · Answer 1

Option B

Explanation:

The best is to raise reserve requirement.

The capacity of the current reserve is based on its requirements. in other to expand, or improve the capacity, is to raise the requirement of the reserve.

It is just like having a pocket that can receive 100, if you want to increase the capacity of the pocket, you will need to adjust the pocket size, this is raising the pocket requirement for you to receive 200 in same pocket.

From my analogy, option B is the best answer to the question.