ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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to buy bonds
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to balance the budget
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to supply cash withdrawals
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to fund business investments
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Detailed explanation-1: -Reserve requirements are the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals. Reserve requirements are a tool used by the central bank to increase or decrease the money supply in the economy and influence interest rates.
Detailed explanation-2: -The Federal Reserve requires banks and other depository institutions to hold a minimum level of reserves against their liabilities. Currently, the marginal reserve requirement equals 10 percent of a bank’s demand and checking deposits.
Detailed explanation-3: -Maintaining the specified Cash Reserve ratio helps banks hold the right amount of funds with them and never fall short of it when needed by their depositors for personal needs.
Detailed explanation-4: -To enhance liquidity and deter bank runs. To help fund the Federal Deposit Insurance Corporation, which insures bank deposits. To give the Fed control over the lending ability of commercial banks.