Chapter 3 - Lesson 2
Money and Interest

Reserve requirements are the portion of deposits that banks may not lend and have to keep either on hand or on deposit at a Federal Reserve Bank. You can learn more about reserve requirements by visiting the web site maintained by the Federal Reserve Bank of New York.

Suggested keywords: reserve requirements, Federal Reserve Bank of New York
Web site: http://www.ny.frb.org/pihome/fedpoint/fed45.html

Your Name:

Today's Date:

Question 1:
What are transaction deposits? Time deposits? What are the current reserve requirements for each?

Question 2:
The Monetary Control Act of 1980 (MCA) provided that the reserve requirement would be only 3% for the first $25 million of a bank's transaction accounts. (As of late 2003, that figure had risen to $45.4 million.) Why did the MCA make this provision?

Question 3:
The Fed changes reserve requirements for monetary policy purposes very infrequently. Why?