Question

: Discuss why the Fed rarely changes the reserve requirements

Answer 1

The reserve requirement can be described as the amount of money that banks are required to hold in their vaults by the Federal Reserve.

Explanation:

The Fed rarely changes the reserve requirement because any change made in the reserve requirement will cause drastic effects on the money held by banks, this means that the money supply will be strongly affected. if any changes are made in the reserve requirement, banks will find it hard to modify to the changes required by the Fed, thus affecting the monetary system of an economy.