The required reserve ratio helps determine to what degree banks can create money.

Question

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The required reserve ratio is the percentage of deposits that banks are required to hold as reserves, which means they cannot lend out that portion of the deposit. Therefore, it affects how much money banks can create through loans and other forms of credit. The higher the reserve ratio, the less money banks can create, and vice versa.

The Required Reserve Ratio Helps Determine to What Degree Banks