Question

The "reserve requirement" varies according to the ______________________ and the type of deposit (checking, savings, etc.).A. amount of caffeine in the bloodstreamB .size of the financial institutionC. mood of the Fed each Monday morningD. none of the above

Answer 1

Answer:

.size of the financial institution

Explanation:

The reserve requirement is one of the monetary policies of the Fed used to increase or decrease the money supply in the economy. The Fed will require commercial banks a certain percentage of the cash deposits in their vaults as reserve. Through the reserves requirement, the Fed regulates the amount of money available to be loaned to firms and households.

The amount of reserve a bank is supposed to hold as reverse is dependent on its size. For example, small size banks whose transaction accounts are below 15.2 million are not required to hold reserve. Medium size banks that with transaction account that range from $15.2 million to $110.3 million are required to keep 3 percent of deposits as reserve. Large banks with transaction accounts above $110 million must hold 10 percent as reserve.