The Legal Requirement That Commercial Banks Hold Reserves Equal to Some

Multiple Choice

The legal requirement that commercial banks hold reserves equal to some fraction of their deposits

A) limits the ability of banks to expand the money supply by extending additional loans.
B) prevents the Fed from controlling the money supply since commercial banks can always offset the actions of the Fed.
C) prevents runs on banks by depositors who fear that banks have insufficient assets to meet the claims of their depositors.
D) limits the ability of the Treasury to expand the national debt.