Asked by feiben alaze on Jul 15, 2024
Verified
Which statement is true?
A) Actual reserves - required reserves = excess reserves.
B) Required reserves - actual reserves = excess reserves.
C) Required reserves + actual reserves = excess reserves.
D) None of the statements are true.
Excess Reserves
Banks' reserves that exceed the minimum reserve requirements set by central banking authorities, indicating additional liquidity.
Actual Reserves
The total amount of funds that a bank has held in reserve, both required and excess, to meet its liabilities.
Required Reserves
Minimum vault cash or reserves; held at the Federal Reserve District Bank.
- Analyze how actions taken by the Federal Reserve influence the reserves held by commercial banks and the total supply of money.
Verified Answer
RS
Ruthson Seide
Jul 20, 2024
Final Answer :
A
Explanation :
This is the correct equation for calculating excess reserves in a bank's balance sheet. Actual reserves refer to the amount of money that a bank holds in its reserves, which is mandated by the Federal Reserve. Required reserves are the minimum amount that the bank is required to hold, and excess reserves are the difference between the two. Therefore, the equation is: Excess reserves = Actual reserves - Required reserves.
Learning Objectives
- Analyze how actions taken by the Federal Reserve influence the reserves held by commercial banks and the total supply of money.