The measure that is set by the Federal Reserve Bank which is a fraction of the checking account balances of banks is called the Reserve Requirement.
What is the reserve requirement?
This refers to a fraction of the checking account balances that commercial banks hold from the public. The Fed will hold this amount in reserve,
The reason for this is so that banks will have money to give out to customers in case there is a run on banks like the one that happened in the Great Depression era.
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