The reserve requirement is:
A)the regulation that sets the minimum fraction of deposits banks must hold in reserve.
B)the dollar amount of cash banks must keep on hand and not loan out.
C)currently set at $2 million for most banks.
D)None of these is true.

Question

Quizplus · Accepted Answer

The reserve requirement is the regulation that sets the minimum fraction of deposits banks must hold in reserve. Option B is incorrect because the dollar amount of cash banks must keep on hand and not loan out is called the cash reserve. Option C is incorrect because the reserve requirement varies depending on the size and type of bank. Option D is incorrect because option A is true.

The Reserve Requirement Is