question archive The main purpose of reserve requirements is to (a) enable the Fed to control the amount of demand deposits (b) ensure that banks have a safe margin of cash assets available for daily use (c) prevent banks "runs" by building public confidence in US banking (d) enable the Fed to buy government securities with the reserves that banks have to keep at the Fed
The main purpose of reserve requirements is to (a) enable the Fed to control the amount of demand deposits (b) ensure that banks have a safe margin of cash assets available for daily use (c) prevent banks "runs" by building public confidence in US banking (d) enable the Fed to buy government securities with the reserves that banks have to keep at the Fed
Subject:EconomicsPrice:2.88 Bought3
The main purpose of reserve requirements is to
(a) enable the Fed to control the amount of demand deposits
(b) ensure that banks have a safe margin of cash assets available for daily use
(c) prevent banks "runs" by building public confidence in US banking
(d) enable the Fed to buy government securities with the reserves that banks have to keep at the Fed
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c. Prevent banks " runs" by building public confidence in US banking.
Reason: It is a mandatory requirement for the banks to keep a certain portion of their deposits as reserve requirement so that in case of sudden withdrawals from the depositors, the bank is in a comfortable position to meet the liabilities without having to face a situation of bank run. Reserve requirement is additionally used by the central bank as a regulatory tool to control the interest rates in the economy.
