The central banking system in the country of Darmos issues a notice to all its commercial banks stating that they must hold funds that are equal to 48% of the deposits held by their customers. In the given scenario, the central banking system's notice exemplifies _____.
A) full-reserve banking
B) the statutory framework
C) the reserve requirement
D) statutory liquidity ratio

Question

Quizplus · Accepted Answer

The central banking system's notice is an example of the reserve requirement, which is the regulation that sets the minimum fraction of customer deposits and notes that each commercial bank must hold as reserves rather than lend out.

The Central Banking System in the Country of Darmos Issues