Investor Glossary-reserve requirementInvestor Glossary-reserve requirementInvestor Glossary-reserve requirementInvestor Glossary-reserve requirementInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Reserve Requirement

The HTML to link to this page
 

The reserve requirement is the fraction of deposits that a central bank requires that banks hold rather than lend out. Thus, a reserve requirement is a tool of monetary policy. The reserve requirement has such a powerful effect on the money supply that it is considered too blunt to change regularly. In the US, the Federal Reserve usually sets a reserve requirement of approximately 10%, and even slight changes are made very infrequently. US banks must deposit at least their reserve requirement with one of the Federal Reserve branches. At this reserve requirement rate, the US banking system has a simple deposit multiplier of 10. Thus, with a 10% reserve requirement, the Fed can increase or decrease the broad money supply by a convenient 10 times the amount of any open market operation.



Rate this reserve requirement definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: FICO score, Key Rate Duration, implied volatility, 144a, required rate of return, class C shares, open position, Zero Cost Collar, ex-dividend date, retained earnings, LIBOR, stock split, EBITDA, ex-dividend, limit order, balance sheet, FTSE, deferred tax, liquidity ratio, 1031 exchange, per diem, deferred revenue, reverse mortgage, cancelled check, stock market close, margin rate, current ratio, diluted share, dividends payable, real GDP, in escrow, risk management, APR, irrevocable trust, command economy, quality assurance, wholly-owned subsidiary, 1035 exchange, option premium, VIX, covered put, labor relations, average price per share, inflation, phantom income, minority interest, 401a, debt service coverage, annual return


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use