Asked by Aleyna Akgun on Jun 29, 2024
Verified
A bank can eliminate its negative excess reserves by doing each of the following except
A) borrowing in the Federal Funds market.
B) borrowing at the discount window.
C) buying United States government securities.
D) not renewing loans.
Federal Funds Market
A U.S. financial market allowing banks to borrow and lend excess reserves to each other, usually overnight, at an interest rate called the federal funds rate.
Discount Window
The discount window is a central banking facility that allows financial institutions to borrow reserves, usually short-term, at a predetermined interest rate, to maintain liquidity.
Negative Excess Reserves
Refers to a situation where a bank's actual reserves fall short of the required reserves; although not typical, it would indicate financial stress or unusual circumstances.
- Identify and explain the measures banks can take to manage reserve deficiencies and maintain regulatory compliance.
Verified Answer
Learning Objectives
- Identify and explain the measures banks can take to manage reserve deficiencies and maintain regulatory compliance.
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