QuestionMay 24, 2025

Lowering the reserve ratio changes: Required reserves to excess reserves Decreases the amount of excess reserves banks must keep Decreases the discount rate Increases the discount rate

Lowering the reserve ratio changes: Required reserves to excess reserves Decreases the amount of excess reserves banks must keep Decreases the discount rate Increases the discount rate
Lowering the reserve ratio changes: Required reserves to excess reserves Decreases the amount of excess reserves banks must keep Decreases the discount rate Increases the discount rate

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Answer

Lowering the reserve ratio changes required reserves to excess reserves and decreases the amount of excess reserves banks must keep. Explanation 1. Understand Reserve Ratio Impact Lowering the reserve ratio decreases the amount of required reserves, allowing banks to have more excess reserves. 2. Analyze Excess Reserves With a lower reserve ratio, banks must keep fewer reserves, increasing their excess reserves. 3. Evaluate Discount Rate Changes The reserve ratio does not directly affect the discount rate. It influences liquidity but not the rate itself.

Explanation

1. Understand Reserve Ratio Impact<br /> Lowering the reserve ratio decreases the amount of required reserves, allowing banks to have more excess reserves.<br /><br />2. Analyze Excess Reserves<br /> With a lower reserve ratio, banks must keep fewer reserves, increasing their excess reserves.<br /><br />3. Evaluate Discount Rate Changes<br /> The reserve ratio does not directly affect the discount rate. It influences liquidity but not the rate itself.
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