Quick Answer: What Are Reserves Quizlet?

What is the reserve requirement quizlet?

reserve requirement.

rule stating that a percentage of every deposit be set aside as legal reserves.

excess reserves.

legal reserves in excess of the reserve requirement.


How are bank reserves calculated?

I know that in order to calculate required reserves, total bank deposits must be multiplied by the required reserve ratio. In this case, bank deposits are $500 million multiplied by the required reserve ratio of 0.12 which equals $60 million in required reserves.

What is known as required reserves?

The minimum amount of reserves a bank is required to hold is known as: Required reserves. *The required reserve ratio is set and regulated by the Federal Reserve. Required reserves represent: A leakage from the flow of money.

What are excess reserves quizlet?

Excess Reserves. reserves that banks hold over and above the legal requirement. Reserves. deposits that a bank keeps as cash in its vault or on deposit with the Federal Reserve. Required Reserve.

How does the Federal Reserve fight inflation quizlet?

The fed engages in contractionary monetary policy to combat inflationary gaps. In order to combat inflation, the Fed engages in an open market sale of bonds, decreasing the money supply and raising the interest rate. … The relationship between the money supply and the price level.

What are reserves?

Reserves – also known as retained earnings – are portions of a business’s profits which have been set aside to strengthen the business’s financial position. … Reserves are often used to purchase fixed assets; to repay debts; or to fund expansions, bonuses, and dividend repayments.

What are the 3 types of reserves?

There are different types of reserves used in financial accounting like capital reserves, revenue reserves, statutory reserves, realized reserves, unrealized reserves.

What is the reserve ratio?

The reserve ratio is the portion of reservable liabilities that commercial banks must hold onto, rather than lend out or invest. This is a requirement determined by the country’s central bank, which in the United States is the Federal Reserve. … The reserve ratio is specified by the Federal Reserve Board’s Regulation D.

Why do reserve requirements exist quizlet?

Reserve requirements exist primarily to prevent bank failures.

Why does the Federal Reserve require banks to keep a percentage of their funds as reserves?

Requiring banks to have a reserve requirement serves to protect them and their customers from a bank run. When the Fed adjusts the reserve requirement, it allows banks to charge lower interest rates.

What are bank reserves quizlet?

A bank’s reserves include: the bank’s deposits at the Federal Reserve. A bank’s reserves include: vault cash.

What is the reserve ratio quizlet?

Reserve ratio: The ratio of a bank’s reserves to its total transactions deposits.

When a commercial bank has excess reserves quizlet?

If the original balance sheet was for the commercial banking system, rather than a single bank, loans and checkable deposits could have been expanded by a maximum of: $25,000. When a commercial bank has excess reserves: it is in a position to make additional loans.

What do bank reserves include?

The required bank reserve follows a formula set by the Federal Reserve Board’s regulations that are based on the amount deposited in net transaction accounts. These include demand deposits, automatic transfer accounts, and share draft accounts.

When we keep part of your wealth in a savings account money is playing the role of?

Terms in this set (143) Which combination of assets is considered to be money? When we keep part of our wealth in a savings account, money is playing the role mainly of: barter.