Asked by DANTE ANDERSON on Jun 29, 2024
Verified
If a bank has negative excess reserves,
A) it is bankrupt.
B) its required reserves are greater than its actual reserves.
C) it must stop making loans.
D) it must raise the interest rates it is charging borrowers.
Negative Excess Reserves
A situation where banks hold less in reserves than what is required by regulations, a condition that could lead to liquidity issues.
Required Reserves
The minimum amount of funds that a bank must hold in reserve against specified deposit liabilities.
Actual Reserves
Actual reserves refer to the total amount of funds that a bank has on deposit at the Federal Reserve bank of its district, plus its vault cash, constituting its total legal reserves.
- Assess the relationship between monetary policy actions (e.g., open market operations, reserve requirements) and banking operations.
Verified Answer
Learning Objectives
- Assess the relationship between monetary policy actions (e.g., open market operations, reserve requirements) and banking operations.
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