What is the reserve requirement? What will be an ideal response?

QUESTION

What is the reserve requirement?

What will be an ideal response?

ANSWER

Answer: The reserve requirement says that a bank must reserve as cash (as vault cash or in a Federal Reserve bank account) 3% to 10% of whatever funds it has in ordinary checking or savings accounts, called transaction accounts.
Explanation: The reserve requirement says that a bank must reserve as cash (as vault cash or in a Federal Reserve bank account) 3% to 10% of whatever funds it has in ordinary checking or savings accounts, called transaction accounts.