Question

-If the United States economy is in a recession or slowing down and the Federal Reserve...

-If the United States economy is in a recession or slowing down and the Federal Reserve implements a “quantitative easing” monetary policy. Would the Fed – increase or decrease reserve requirements?

- If the United States economy is dealing with high inflation and the Federal Reserve implements a “quantitative tightening” monetary policy. Would the Fed – increase or decrease reserve requirements?

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Answer #1

1. DECREASE- Federal Reserve will be adopting a qualitative easing policy in order to cut down on the Reserve requirement of commercial bank so that they can lend more and stimulate the demand in economy.

2. INCREASE- If the United States economy is dealing with high inflation and Federal Reserve is adopting a quantitative tightening policy, it will mean that Federal Reserve is going to increase the Reserve requirement because they are trying to cut down on the demand and reduce the level of monetary flow in the economy.

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