If the Federal Reserve lowers the reserve ratio, it is said to lowers the amount of cash that banks are needed to hold in reserves and thus, it gives room for them to make more loans.
Note that Lowering the reserve ratio is one that pumps money into any economy as it is said to often gives banks excess reserves, and thus leads to the expansion of bank credit and reduce rates.
<h3>What occurs if the required reserve ratio is zero?</h3>
By placing the reserve requirements to zero, the Fed will be able to bring up or increase excess reserves, and this will in turn make the stock of liquid assets to be more eligible to meet some level of supervisory regulations and expectations.
Hence, If the Federal Reserve lowers the reserve ratio, it is said to lowers the amount of cash that banks are needed to hold in reserves and thus, it gives room for them to make more loans.
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