Which of the following is true regarding the required reserve ratio?
A) The ratio determines the amount of excess reserves a bank must hold.
B) The ratio is only enforced against banks that are operating in a risky manner.
C) The ratio determines the legally required amount of reserves a bank must hold.
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The required reserve ratio determines the legally required amount of reserves a bank must hold. This ratio varies depending on the size of the bank and the total amount of deposits it holds. Banks are required to meet this ratio, which is set by the central bank, in order to ensure that they have enough reserves to meet customers' needs for cash withdrawals and other transactions.

Which of the Following Is True Regarding the Required Reserve