Banking 8 - Reserve Ratios

Question 1

reserve?

Answer 1

something kept aside because you might need it one day

Question 2

reserve ratio = ?

Answer 2

real assets (actual cash) / total demand liabilities (total bank notes and demand/checking accounts)

Question 3

reserve requirements?

Answer 3

the percentage of reserves that should be kept around

e.g., in US reserve ratio is 20% therefore 20% of total deposits should be kept as cash reserves and 80% can be loans out