Banks fail when all depositors try to withdraw money at the same time. One way to prevent this problem would be to require banks to hold 100% of deposits on hand. Why would this not be a desirable thing to do? What would happen to the banking system? What would you expect to see happen to the cost of a checking account if banks could not make loans? What would happen to the amount of investment made by businesses? Explain.© BrainMass Inc. brainmass.com October 24, 2018, 8:53 pm ad1c9bdddf
The amount of funds banks are required to keep on hand are called reserve requirements. Reserve requirements are one important tool the Fed uses to control the economy. It can do this because money is essentially created when the reserve ratio is lowered. If the reserve requirement is 10%, for example, a bank that receives a ...
How the reserve requirement affects economic growth.
Monetary policy helps to sustain economic growth
A question that arises in training is, "How does monetary policy help sustain growth and help the ups and downs of the business cycle?" Given the key role of monetary policy and knowing this question will continue to arise, you decide to add a section about this topic.
Discuss how monetary policy helps to sustain economic growth and smooths out the swings in the business cycle.
Analyze the ways in which monetary policy can influence a nation's economic goals of achieving full employment, controlling inflation, sustaining adequate economic growth, and achieving a stable balance-of-payments position.View Full Posting Details