Series 7: 9.2.1.2.3. Altering Reserve Requirements

9.2.1.2.3. Altering Reserve Requirements

The Fed also implements monetary policy through manipulating reserve requirements. A reserve requirement is the amount of funds that the Fed requires depository institutions, such as banks, to hold in reserve against deposits made by their customers. To stimulate the economy, the Fed lowers the reserve requirements, allowing banks to lend out more money. Americans then have more money available to invest an