The required reserve ratio
A) is the amount of money that banks require borrowers to reserve in their accounts.
B) is the fraction of a bank's total deposits that is required to be held in reserves.
C) increases when withdrawals from a bank are made.
D) is higher for banks that make riskier loans.

Question

Quizplus · Accepted Answer

The required reserve ratio is the fraction of a bank's total deposits that must be held in reserve and is not available for lending. This is a regulatory requirement meant to ensure banks have enough liquidity to meet withdrawal demands.

The Required Reserve Ratio