Question

ABC Bank decided to raise interest rates on new loans because it does not want to run short on reserves. The bank does not approve of the new rates it would see in the overnight lending market. What Federal Reserve action MOST LIKELY influenced ABC Bank's decision? A increasing the reserve requirement B selling bonds on the open market C decreasing the federal funds rate D decreasing the discount rate

Answer 1

Answer:

A increasing the reserve requirement

Explanation:

The likeliest reason ABC Bank decided to raise interest rates on new rates so that it would not run low on reserves was as a result of the Federal Reserve's action to increase reserve requirements.

The Federal Reserve can decide to increase reserve requirements to decrease the size of money supply and control inflation, thereby protecting the economy.