What is the reserve requirement?
A) the legal minimal percentage of deposits required to be held in reserve by banks
B) the percentage of reserves that is held only on amounts over $43.9 million
C) the amount of reserves that the Fed wants to inject at a given time
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

The reserve requirement is the legal minimum percentage of deposits that banks are required to hold in reserve. This is set by the Federal Reserve as a way to ensure that banks have enough liquidity in case of a financial crisis. Banks can hold more than the required amount, but they cannot hold less. This is an important tool for the Fed to control the money supply and to promote stability in the financial system.

What Is the Reserve Requirement