If a bank is subject to a reserve requirement of 3% and if its reserve ratio is 1%,then this bank is considered highly liquid.

Question

Quizplus · Accepted Answer

A reserve ratio of 1% indicates that the bank is holding only 1% of its deposits as reserves, which means that it is not highly liquid. In fact, it is only meeting the minimum reserve requirement of 3% and may need to acquire additional funds to meet unexpected cash demands or contingencies. A higher reserve ratio would indicate a better liquidity position for the bank.

If a Bank Is Subject to a Reserve Requirement of 3