A financial depository institution's reserve requirement is a specific percentage of:
A) deposits that the institution must keep as actual reserves.
B) deposits that the institution must keep as excess reserves.
C) actual reserves that the institution must keep as excess reserves.
D) required reserves that the institution must keep as actual reserves.

Question

Quizplus · Accepted Answer

The reserve requirement is the fraction of deposits that a financial depository institution must hold in reserve and not lend out. This means that a certain percentage of the deposits received by the bank must be kept as actual reserves, either in its vaults or at the central bank, to ensure that the bank can meet its depositor's demands.

A Financial Depository Institution's Reserve Requirement Is a Specific Percentage