Discuss the reserve requirements method of conducting monetary policy, including a description of this method, the types of adjustments banks are likely to be required to be made, and the effects on the economy that are likely to result

Answer 1

One of the methods of conducting monetary policy is for the central bank to raise or lower the reserve requirement, which is the proportion of its deposits that a bank is legally required to deposit with the central bank.
If a bank finds that it is not holding enough in reserves to meet the reserve requirements, it needs to borrow at least for the short term from the central bank. If the central bank raises the discount rate, then banks will hold a higher level of reserves to reduce the chance of needing to borrow at that higher interest rate.
When banks hold higher reserves, it reduces the money supply in the economy as a whole. If the central bank lowers the discount rate, banks will be less concerned about the prospect of needing a short-term loan to fill out their reserves. In turn, the bank will be more willing to lend aggressively, which will increase the money supply.