Why is the change in reserve requirement not frequently used to control the supply of money?
Though reserve requirement change can be very powerful tool for controlling supply of money it is seldom used. This is because a small reduction in the reserve requirement can make a huge change in the number of dollars that are in excess reserves in banks all over the country which can disrupt the whole economy. Frequent changes in the reserve requirement would also make it difficult for banks to plan.
You might also like to view...
Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.
a. true b. false
Suppose the current one-year interest rate is 4%, and financial markets expect the one-year interest rate next year to be 8%. Given this information, the yield to maturity on a two-year bond will be approximately
A) 4%. B) 6%. C) 8%. D) 12%. E) none of the above
Which of the following effects best explains the downward slope of the aggregate demand curve?
A. An expectations effect B. A multiplier effect C. A substitution effect D. An interest-rate effect
Which of the following is a public good?
a. An economics lecture. b. A television set. c. Higher education. d. Housing. e. Clean air