Question

In March of this year, the Federal Reserve lowered the reserve requirement to zero.

What do you think of this? Explain. 2-3 sentences is plenty. Your grade will be based on your explanation (there's not a "right" answer).

Answer 1

Federal Reserve System is a financial system adopted by the Reserve Bank in the United States. It is a financial control system to eliminate financial crisis in the economy. Federal reserve influences the supply of money and credit, regulating and supervising financial institutions, supplying paymhents and services to the public through banks, etc.

Federal Reserve lowered the reserve requirement to zero.  

This is an economic strategy adopted by the Central Bank, for a short term duration, under which, the ultimate goal is to encourage each economic activity with low cost borrowing. It also helps firms and individuals to access credit at cheap interest rate. This is called Zero interest rate policy.  

In continuation to the Global Economic Slowdown, and negative economic growth and a decline in the gross domestic production (GDP), we can say that, it is a right decision at the right time, from the part of the Central Governement.  

The last quarter of the financial year (2019 -20) also witnessed the outbreak of Covid -19, which turned everything upside down and only helped to add fuel to the fire. Hence the central bank's economic strategy was most favourable to the current economic situation.