Which of the following best defines reserve requirements?
A)They are regulations concerning the amount banks are allowed to borrow from the central bank.
B)They are regulations concerning the amount of reserves banks must hold against deposits.
C)They are regulations concerning reserves banks must hold based on the number and type of loans they make.
D)They are regulations concerning the interest rate at which banks can borrow from the central bank.

Question

Quizplus · Accepted Answer

Reserve requirements refer to the amount of reserves that banks are required to hold against their deposits. These reserves can be held in either cash or with the central bank. It is a tool used by central banks to regulate and control the money supply in an economy. Option A refers to discount rate, option C refers to lending restrictions, and option D refers to the interest rate set by the central bank.

Which of the Following Best Defines Reserve Requirements