The required reserve ratio is the ratio of reserves to ________ required by banking regulations.

Question

Quizplus · Accepted Answer

The required reserve ratio is the percentage of deposits that banks are required to hold in reserve, as mandated by banking regulations. This means that a portion of the deposits made by customers must be set aside as reserves, and cannot be loaned out or invested by the bank. The purpose of this requirement is to ensure that banks have enough reserves on hand to cover unexpected withdrawals by depositors, and to prevent excessive lending that could lead to a destabilization of the banking system.

The Required Reserve Ratio Is the Ratio of Reserves to ________