Asked by Parvesh Thakur on May 06, 2024
Verified
Which statement is false?
A) Time deposits are subject to higher reserve requirements than checking deposits.
B) Treasury bills and notes are generally considered part of a bank's secondary reserves.
C) Large banks are subject to a 10 percent reserve requirement on nearly all of their checking deposits.
D) None of the statements are false.
Time Deposits
Time Deposits are savings accounts or certificates of deposit (CDs) that lock the depositor's funds for a certain period of time, during which early withdrawal incurs penalties.
Reserve Requirements
The portion of depositors' balances that banks must have on hand as cash, mandated by central banking authorities.
Treasury Bills
Short-term government securities issued with a promise to be paid back at a specified future date with a fixed interest rate.
- Detail the regulatory and oversight functions undertaken by the Federal Reserve, incorporating the reserve necessities for commercial banks.
Verified Answer
TS
Theresa SyrettMay 09, 2024
Final Answer :
A
Explanation :
Time deposits typically have lower reserve requirements than checking deposits because they are seen as more stable sources of funds, with customers committing their money for a fixed period. Checking deposits are more liquid, leading to potentially higher reserve requirements to ensure banks can meet withdrawal demands.
Learning Objectives
- Detail the regulatory and oversight functions undertaken by the Federal Reserve, incorporating the reserve necessities for commercial banks.