Fed increases the legal reserve requirements
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The following question asked "When the Fed increases the legal reserve requirements, it loosens credit, because the banks have more reserves".
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The solution explains the Fed increases the legal reserve requirements.
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The Federal Reserve controls the three tools of monetary policy--open market operations, the discount rate, and reserve requirements. The term "monetary policy" refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic ...
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