The reserve requirement is:
A) the regulation that sets the minimum fraction of deposits banks must hold in reserve.
B) the dollar amount of cash banks must keep on hand and not loan out.
C) the amount of gold the federal government needs to keep on hand to support the value of the dollar.
D) the cooling period between when money is created and when it can be spent in the economy.

Question

Quizplus · Accepted Answer

The reserve requirement is the regulation that sets the minimum fraction of deposits banks must hold in reserve. This means that banks are required to keep a certain percentage of their deposits on hand, rather than loaning out all of the money they receive. The reserve requirement is set by the central bank, such as the Federal Reserve in the United States.

The Reserve Requirement Is