Question

Monetary Policy set by the Federal Reserve directly impacts the amount of money a bank may...

Monetary Policy set by the Federal Reserve directly impacts the amount of money a bank may loan out because the “Fed” _____.

Group of answer choices:

sets reserve requirements

insures that loans are repaid

clears all loan payments

prints new money

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Answer #1

Monetary policy set by the federal reserve directly impacts the amount of money a bank may loan out because the fed sets reserve requirements.

So option A is the correct statement.

Explanation-

Reserve requirements is the minimum amount of reserve that must be held by the commercial bank according to the guidelines of federal reserve..

If the reserve requirements increases then the commercial Bank has more money to be held and so lending the money as a loan will decrease and if the reserve requirements will decrease then bank have to be keep less money and so bank has more money for lending to thier customer.

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