The reserve ratio refers to the ratio of a bank's
A) reserves to its liabilities and net worth.
B) capital stock to its total assets.
C) checkable deposits to its total liabilities.
D) required reserves to its checkable-deposit liabilities.

Question

Quizplus · Accepted Answer

The reserve ratio refers specifically to the amount of required reserves that a bank must hold against its checkable-deposit liabilities. Required reserves are a percentage of the bank's checkable-deposit liabilities that must be held in reserve either as vault cash or on deposit with the Federal Reserve. Therefore, the correct answer is D - required reserves to its checkable-deposit liabilities.

The Reserve Ratio Refers to the Ratio of a Bank's