2007-11-01 03:36:45 · 2 answers · asked by o a 2 in Business & Finance ➔ Personal Finance
How much of their deposited cash they actually have to keep in cash reserves.
Banks lend out saved money, so they generally don't have all of the deposited cash on hand.
Increasing a reserve ratio will decrease the amount a bank can lend out (and vice versa).
I think they pretty low in the US, high single digits if I am not mistaken.
2007-11-01 04:12:04 · answer #1 · answered by Rush is a band 7 · 1⤊ 0⤋
As the earlier poster's noted, it is the percentage of a banks deposits that they are required to have in the vault or on deposit with the Federal Reserve (in the US). The Fed sets what the ratio is, and they don't change it often as they have other means of adjusting the money supply. Read this brief article on how banks create money to understand how that influences the economy: http://www.straightdope.com/classics/a3_163.html
2007-11-01 09:23:52 · answer #2 · answered by tiescore 6 · 0⤊ 0⤋