Question

The federal reservge wants to increase the lending potential of commercial banks by?

Answer 1

The Federal Reserve will need to raise the excess reserves held by commercial banks if it intends to expand the money supply by expanding its ability to lend. Banks will get cash in their reserve accounts in return for the securities, thus the Fed must purchase those securities from the banks. As a result, they will have more reserves to lend to their clients.

What is Federal Reserve System ?

• The central banking system of the United States of America is the Federal Reserve System, usually referred to as the Federal Reserve or just the Fed.
• With the passage of the Federal Reserve Act on December 23, 1913, it was established in response to the need for centralized control of the monetary system to prevent financial crises following a string of financial panics, including the Panic of 1907.
• The Federal Reserve System's functions and responsibilities have grown over time as a result of occasions like the Great Depression in the 1930s and the Great Recession in the 2000s.
• In the Federal Reserve Act, the U.S. Congress outlined three primary goals for monetary policy: increasing employment, preserving price stability, and lowering long-term interest rates.

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