Question

The amount of reserves that a commercial bank is required to hold is equal to


the amount of its demand deposits


the sum of its demand deposits and time deposits


its demand deposits multiplied by the reserve requirement ration


its demand deposits divided by its total assets

Answer 1

The correct answer is:

**its demand deposits multiplied by the reserve requirement ratio.**

In banking, reserves are the portion of deposits that banks are required to hold as reserves, typically determined by a reserve requirement ratio set by the central bank. This ratio is applied to the bank's demand deposits to calculate the required reserves.