ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Fed Fund Rate
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Reserve Requirement Rate
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Discount Rate
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None of the above
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Detailed explanation-1: -The Federal Reserve requires banks and other depository institutions to hold a minimum level of reserves against their liabilities. Currently, the marginal reserve requirement equals 10 percent of a bank’s demand and checking deposits.
Detailed explanation-2: -Reserve Ratio Guidelines Banks with more than $124.2 million in net transaction accounts were required to maintain a reserve of 10% of net transaction accounts. Banks with more than $16.3 million to $124.2 million needed to reserve 3% of net transaction accounts.
Detailed explanation-3: -banks must keep 20 percent of each deposit and then can lend out the rest. As borrowers pay back loans, or banks get additional deposits, banks can continue to lend out money.
Detailed explanation-4: -In the U.S., the Federal Reserve dictates the amount of cash, called the reserve ratio, that each bank must maintain. Historically, the reserve rate has ranged from zero to 10% of bank deposits. Bank reserves are the minimal amounts of cash that banks are required to keep on hand in case of unexpected demand.