Which one of the following is a tool of monetary policy often used by the Fed for altering the reserves of commercial banks?

A. Issuing currency

B. Check collection

C. Required reserve ratio

D. Open-market operations

Option (C) is correct.

Explanation:

The reserve requirement ratio refers to the ratio of deposits that are kept with the Fed.

It is one of the important monetary policy instruments that Fed uses for controlling the money supply in an economy. The Fed reduces the reserve requirement ratio if there is a need to increase the money supply in an economy and it increases this ratio if there is a need to reduce the money supply in an economy.