What is a reserve requirement?
A)the minimum amount of reserves that each bank must hold
B)a maximum loan amount on the overnight loan market
C)the ceiling on the federal funds rate
D)the amount of money that the Federal Reserve spends on buying bonds

Question

Quizplus · Accepted Answer

A reserve requirement is the minimum amount of reserves that each bank must hold. This is set by the Federal Reserve to ensure that banks have enough cash on hand to meet customer withdrawal requests and cover any unexpected losses. The reserve requirement is expressed as a percentage of a bank's deposits and can influence the amount of money banks are able to lend out.

What Is a Reserve Requirement