Required Reserves

Economics Glossary – Malone Global University

Definition

Required reserves are the minimum amount of funds that banks must hold as reserves—either as cash in their vaults or as deposits at the central bank—based on a rule tied to customer deposits.

Why It Matters

They influence how much banks can lend and therefore affect money creation and overall credit conditions.

Example

If required reserves are 10%, a bank with $1,000,000 in deposits must hold $100,000 as required reserves.

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