Practice Quiz

Praxis II Citizenship

Category - Economics

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The portion of each individual account balance that a bank must keep on hand in cash is the:
  1. Reserve ratio.
  2. Reserve fund.
  3. Reserve-replacement ratio
  4. Reserve currency.
Explanation
Answer: A - The reserve ratio is the percentage of each bank account balance that the account-holding institution must have on hand in cash. For example, if Old Hickory Bank has a reserve ratio of 10 percent and Will Harrison’s Old Hickory account balance is $10,000, the bank must have $1,000 in cash. The Federal Reserve sets reserve ratios for U.S. banks. A reserve ratio may also be called a reserve requirement.
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