Question

To stimulate the economy, the Federal Reserve decides that the amount of money in circulation

Answer 1

Answer:

Lower the reserve requirement ratio

Explanation:

Stimulating the economy requires expansionary monetary policies. These are the actions that increase the money supply in the economy.  When there is an increase in the money supply, people and businesses have more money to spend. An increase in spending means a higher demand for goods and services, which motivates increased production.

Reserves requirement is the proposition of customer deposits that commercial banks retain in their custody at all times. A reduction in the reserve requirement ratio implies that banks can loan out a larger proportion of customer deposits. The amount of money available for banks to issue out as loan increases.  An increase in lending adds to the money supply in the economy, which, in turn, stimulates economic activities.