Which of the following explains why the government sets a required reserve

ratio for private banks?

O

A. To enable the regulation of risk levels in the decision process of

offering loans.

B. To make sure banks don't run out of money when customers make

withdrawals.

O

C. To prevent banks from printing too much money and causing

inflation.

O

D. To allow the government to control the interest rate charged on

loans.

Question

Business

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1 October, 19:01

Which of the following explains why the government sets a required reserve

ratio for private banks?

O

A. To enable the regulation of risk levels in the decision process of

offering loans.

B. To make sure banks don't run out of money when customers make

withdrawals.

O

C. To prevent banks from printing too much money and causing

inflation.

O

D. To allow the government to control the interest rate charged on

loans.

+4

Answers (2)

Know the Answer?

Dayami Page · Answer 1

Answer: to make sure banks don't run out of money when customers make withdrawals

Zain Parks · Answer 2

The correct answer is (B)

Explanation:

Reserve ratio is set by the government and state bank to avoid bankruptcy. Reserve ratio is a percentage of total deposits that the bank saves for their customers. Likewise, in case of an emergency, the banks can use that money to pay the liabilities. The basic purpose is to make sure that banks can offer money to their customers when they wish to withdraw