The Fed Provides Reserves to Banks and Also Requires Banks $\frac { 1 } { \text { required reserv e ratio } }$

Multiple Choice

The Fed provides reserves to banks and also requires banks to hold, as reserves, a portion of the deposits that the public holds at the banks. The banks, playing their key role in the money multiplier, lend the remainder of the deposits (or most of it) to borrowers at an interest rate that exceeds that of demand deposits. For any one bank, the remainder equals deposits less required reserves, which can be expressed as deposits times ________.

A) (1 - $\frac { 1 } { \text { required reserv e ratio } }$ ) .
B) (1 - required reserve ratio) .
C) (1 × required reserve ratio) .
D) $\frac { 1 } { \text { required reserv e ratio } }$ .