The Federal Reserve is considering requiring banks to put a higher per

QUESTION

The Federal Reserve is considering requiring banks to put a higher percentage of their money into the Fed. What’s the likely outcome?

A) It reduces the money supply.
B) Banks have more to lend to their customers.
C) The Fed is able to spend more on government programs.
D) Banks are allowed to reduce their reserve requirement.
E) The discount rate adjusts.

ANSWER

Answer: A
Explanation: A) When banks are required to put more of their money into the Fed, it reduces the money supply, so that banks have less to lend to their customers.