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


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