The portion of deposits that a bank is required to hold on reserve is referred to as its:
A) total reserve ratio.
B) excess reserves.
C) legal reserves.
D) required reserve ratio.

Question

Quizplus · Accepted Answer

The required reserve ratio is the fraction of deposits that a bank is mandated by regulation to hold in reserve and not lend out. This ensures that banks have enough liquidity to meet withdrawal demands.

The Portion of Deposits That a Bank Is Required to Hold