The Reserve Requirement (RR) is the percentage of money from
deposits that the bank must keep either as vault money or on reserve with a Fed
branch. Altering the RR changes the money supply; the absence or lowering of
the RR had a great impact on the cause of the Great Depression. Lowering the
discount rate, or the interest rate the Fed charges commercial banks they have
loaned money to, should increase the Fed’s loan activities. “Buy Bonds= Big
Bucks”, if the Fed buys bonds, it means more money for the people which will ultimately
raise the money supply.
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