Question

Which of the following best describes the purpose of raising and lowering the
required reserve ratio?
O
A. To make sure that government spending does not result in either a
surplus or deficit.
O
B. To regulate the activity of private banks to assure an equitable
distribution of wealth.
O
C. To manage the economy by increasing or decreasing the amount
of loans being made.
D. To stimulate economic growth by making it less expensive for
producers to get loans.

Answer 1

Answer:

To manage the economy by increasing or decreasing the amount

of loans being made

Explanation:

Answer 2

The following that best describes the purpose of raising and lowering the required reserve ratio is Option(C) To manage the economy by increasing or decreasing the amount of loans being made.

What best describes the purpose of raising and lowering the required reserve ratio ?

By raising and lowering the required reserve ratio means that when reserve ratio requirement is increased, the Federal Reserve is essentially taking money out of the money supply and increasing the cost of loan. Lowering the reserve ratio requirement takes out the money into the economy by giving banks excess reserves, which promotes the expansion of bank credit and lowers rates.

Thus the main purpose of doing this, is to maintain and regulate the loan amount which is being made by any respective bank. The required reserve ratio is always altered so that the loan amount also varies with the change in the ratio value.

Therefore, the following that best describes the purpose of raising and lowering the required reserve ratio is Option(C) To manage the economy by increasing or decreasing the amount of loans being made.

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