Which of the following statements concerning commercial banks is true?

Question

Quizplus · Accepted Answer

Most banks maintain cash reserves equal to a fraction of deposits, typically set by the central bank or the government. This fraction is known as the reserve requirement ratio. The purpose of maintaining cash reserves is to ensure that banks have enough liquid assets to meet the withdrawal demand of their depositors. Banks can earn a small rate of return on their cash reserves, but it is not typically the highest rate of return compared to other assets. The advent of the Federal Reserve did not eliminate the need for banks to maintain cash reserves.

Which of the Following Statements Concerning Commercial Banks Is True