The Fed can perfectly control the amount of reserves in the system. Is this stat

Question

The Fed can perfectly control the amount of reserves in the system. Is this statement true, false, or uncertain? Explain your answer O A. False. A shift from deposits to currency will affect the amount of reserves, and since other players are involved in this process, the Fed O B. True. The Fed is able to effectively control the monetary base and the amount of reserves through open market operations. ultimately cannot control the level of reserves in the system. O C. True. Because the Fed sets the required reserve ratio for banks, it effectively has control over the amount of reserves in the banking system D. Uncertain. The amount of control the Fed has over reserves is variable, as it often depends on current economic conditions

Explanation / Answer

Ans is A

Fed cannot fully control the reserves because deposit or withdrawal can change the reserves required and thus actual reserves and required reserves may varies. Thus there are many other factors that are affecting it like

Banking habit of people

Lending habit of commercial banks etc.

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