The Federal Reserve sets the reserve requirement, which banks must meet through

Question

The Federal Reserve sets the reserve requirement, which banks must meet through deposits at the Fed and cash held at the bank. What do these requirements achieve? Check all that apply.

A. They mean that banks must have one dollar of deposits for every dollar it loans.

B. They help to control the money supply.

C. They help to prevent bank runs by reassuring the public that banks will not make too many loans and run out of cash.

D. They help to facilitate transfers of funds between banks when a customer from one bank writes a check to a customer of another.

Explanation / Answer

Option C.

These requirements help in preventing bank runs and measures the public that bank will not run of cash.

The reserve requirements were set up to do the end of day.

Sum transactions between banks .

These reserves also Assures the public that the banks will not make too many loans to them.

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