The amount of reserves that a commercial bank is required to hold is equal to
A) the amount of its checkable deposits.
B) the sum of its checkable deposits and time deposits.
C) its checkable deposits multiplied by the reserve requirement.
D) its checkable deposits divided by its total assets.

Question

Quizplus · Accepted Answer

The amount of reserves that a commercial bank is required to hold is determined by the reserve requirement set by the central bank. This requirement is a percentage of the bank's checkable deposits. Therefore, the amount of reserves a bank is required to hold is equal to its checkable deposits multiplied by the reserve requirement.

The Amount of Reserves That a Commercial Bank Is Required