Reserve requirements set by the Federal Reserve are the:

Question

Reserve requirements set by the Federal Reserve are the:

A. minimum value of reserves to deposits that commercial banks are allowed to maintain.

B. maximum value of reserves to deposits that commercial banks are allowed to maintain.

C. minimum amount of currency banks must hold in their vaults.

D. maximum amount of currency banks are allowed to hold in their vaults.

E. minimum amount of bonds commercial banks must purchase from the Federal Reserve.

Answer 1

A. minimum value of reserves to deposits that commercial banks are allowed to maintain.

If banks fail to meet this minimum, their banking licence may be withdrwan or penalty levied on them

Answer 2

A. minimum value of reserves to deposits that commercial banks are allowed to maintain.  

Answer 3

Reserve requirements are the amount of funds that a depository institution must hold in reserve against specified deposit liabilities. Within limits specified by law, the Board of Governors has sole authority over changes in reserve requirements. Depository institutions must hold reserves in the form of vault cash or deposits with Federal Reserve Banks.