High School

We appreciate your visit to Excess reserves are a liquidity funds minus actual reserves b required reserves minus desired reserves c actual reserves minus desired reserves d desired reserves minus. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!

Excess reserves are:

a) liquidity funds minus actual reserves.
b) required reserves minus desired reserves.
c) actual reserves minus desired reserves.
d) desired reserves minus actual reserves.
e) required reserves minus actual reserves.

Answer :

Excess reserves in a bank are the actual reserves held above the required reserves, calculated as actual reserves minus the required reserves. Option C.

Excess reserves are the amount of reserves that a bank holds in excess of the required reserves. The required reserves are a certain percentage of the bank's checkable deposits that must be kept on reserve either in the bank's vaults or at the Federal Reserve Bank. This rate is known as the required reserve ratio. If we denote required reserves by 'RR', checkable deposits by 'D', and the required reserve ratio by 'rr', then required reserves are calculated as RR = D imes rr. If total reserves, which consist of required reserves and excess reserves, are denoted as 'TR', then excess reserves 'ER' can be calculated as ER = TR - RR.

Considering our hypothetical banking system with a 10% reserve requirement, banks would need to keep $1,000 in reserves for $10,000 in checkable deposits, resulting in zero excess reserves if they are loaned up. However, if banks decide to hold more than $1,000, then the amount above $1,000 would be considered the excess reserves. Therefore, the answer for excess reserves can be deduced as option (c): actual reserves minus desired reserves.

Thanks for taking the time to read Excess reserves are a liquidity funds minus actual reserves b required reserves minus desired reserves c actual reserves minus desired reserves d desired reserves minus. We hope the insights shared have been valuable and enhanced your understanding of the topic. Don�t hesitate to browse our website for more informative and engaging content!

Rewritten by : Barada