The required reserve ratio is the:
A) actual amount of reserves that banks must hold.
B) excess amount of reserves that a bank must hold.
C) minimum amount of reserves the Fed requires a bank to hold.
D) total amount of reserves that banks hold at all times.
E) maximum amount of reserves that banks can hold to remain liquid.

Question

Quizplus · Accepted Answer

The required reserve ratio is the minimum amount of reserves that the Federal Reserve requires a bank to hold. This ratio is determined by the Federal Reserve and is used to control the money supply. Banks must hold this minimum amount of reserves in order to meet their customers' demands for cash withdrawals and other payment obligations.

The Required Reserve Ratio Is The