Final answer:
The correct answer is Option b) Reserve. A reserve requirement is a regulation set by the Federal Reserve that specifies the fraction of checkable deposits that a bank must keep on hand.
Step-by-step explanation:
The term that fits into the blank is Reserve. A reserve requirement is a regulation set by the Federal Reserve that specifies the fraction of checkable deposits that a bank must keep on hand. This requirement ensures that banks have enough liquidity to meet any potential deposit withdrawals from their customers.
For example, if the reserve requirement is set at 10%, a bank must keep 10% of its checkable deposits as reserves and cannot lend or invest that amount. If a customer deposits $1,000 in the bank, the bank must keep $100 ($1,000 x 10%) as reserves and can only use $900 for loans or investments.