Which of the following is true regarding the required reserve ratio?
A) The ratio determines the legally required amount of reserves a bank must hold.
B) The ratio determines the amount of excess reserves a bank must hold.
C) The ratio is only enforced against banks that are operating in a risky manner.
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The required reserve ratio is the fraction of deposits that a bank is mandated by regulation to hold in reserve, ensuring it can meet withdrawal demands. This ratio does not dictate the amount of excess reserves a bank must hold, nor is it applied selectively based on a bank's operational risk.

Which of the Following Is True Regarding the Required Reserve