Asked by Tatiana Cortes on Jul 22, 2024
Verified
Commercial banks are required by law to hold reserves.These reserves are specified as percentages of a bank's
A) total assets.
B) total liabilities.
C) checkable deposit liabilities.
D) holdings of government securities.
E) net worth.
Commercial Banks
Commercial banks are financial institutions that accept deposits, offer checking account services, and make loans to individuals and businesses.
Reserve Requirements
Regulations set by central banks determining the minimum amount of reserves that must be held by a commercial bank.
Checkable Deposit Liabilities
These are bank account deposits that are immediately available to make payments and transfers, typically seen in checking accounts.
- Elucidate the control and supervisory mechanisms of the Federal Reserve, along with the reserve obligations imposed on commercial banks.
Verified Answer
IL
Isabel LizarragaJul 26, 2024
Final Answer :
C
Explanation :
The reserves that commercial banks are required to hold are called reserve requirements and are specified as a percentage of the bank's checkable deposit liabilities. This means that the answer is not A or B, which include all assets or liabilities, respectively. The answer is also not D or E, as holdings of government securities or net worth are not used to determine reserve requirements.
Learning Objectives
- Elucidate the control and supervisory mechanisms of the Federal Reserve, along with the reserve obligations imposed on commercial banks.