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Reserve Ratio

Reserve Ratio Definition

Reserve Ratio refers to the amount of money and liquid assets that banks have to hold, expressed as a percentage of depositors' balances at the given bank. The reserve ratio is determined by the country's central bank. In the U.S., the Federal Reserve System is acting as a central bank. If it determines a 10 % reserve ratio, and a bank has a deposit of $100 million, the bank has to maintain $10 million on reserve.







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