The required reserve ratio is determined by how:
A) much lending banks wish to engage in.
B) liquid banks wish to be.
C) much the Fed determines banks must hold in reserves.
D) active capital markets function.

Question

Quizplus · Accepted Answer

The required reserve ratio is determined by the Federal Reserve, also known as the Fed. The Fed sets this ratio, which dictates the percentage of deposits that banks must hold in reserve, in order to influence the supply of money in the economy. Therefore, option C is the correct answer. Options A, B, and D are all factors that can influence a bank's decision-making, but are not directly related to the required reserve ratio.

The Required Reserve Ratio Is Determined by How