Question

In lowering the reserve requirement for banks, the Fed hopes to:

a. improve the economy by making it cheaper for businesses to borrow money.
b. improve the economy by making the Fed Funds rate higher.
c. control inflation by making the Fed Funds rate higher.
d. control inflation by it cheaper for businesses to borrow money.
e. none of the above.

Answer 1

The answer is a. improve the economy by making it cheaper for businesses to borrow money.

Step-by-step explanation:

The answer to the question is a. improve the economy by making it cheaper for businesses to borrow money.

When the Federal Reserve lowers the reserve requirement for banks, it means that banks are required to hold a smaller percentage of their deposits as reserves. This results in banks having more money available for lending. By making it cheaper for businesses to borrow money, the Fed hopes to stimulate economic activity and improve the overall economy.