The risks related to reducing the reserve requirement

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Over the past 7 years the Federal Reserve has taken many expansionary actions such as keeping interest rates low and buying government bonds and mortgage-backed securities to increase the money supply, hoping to spur buying and investment. However, aggregate demand is still weak. Do you think the Federal Reserve should lower the reserve requirement, thus allowing banks to lend out more money? What are the risks related to reducing the reserve requirement?

Reference no: EM131391863

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