Asked by Ja-Juan Victor on May 07, 2024
Verified
The difference between actual and required reserves is known as
A) the required reserve ratio.
B) fractional reserves.
C) extra reserves.
D) excess reserves.
Required Reserves
The minimum amount of funds that a bank or depository institution must hold in reserve against specified deposit liabilities.
Excess Reserves
are the funds that banks hold over and above the required minimum reserves mandated by the central bank.
- Distinguish between actual, required, and excess reserves in the banking system.
Verified Answer
MM
Marian MathisMay 11, 2024
Final Answer :
D
Explanation :
Excess reserves are the difference between actual reserves held by a bank and the required reserves they need to hold. It represents the additional amount of money that a bank can potentially lend out, invest or use in other profitable ways. A and B are not correct as they refer to the ratio or percentage of reserves required to be held by the bank. C is not a commonly used term for this concept.
Learning Objectives
- Distinguish between actual, required, and excess reserves in the banking system.