Excess reserves are reserves that banks keep:
A) in their vaults.
B) at the central bank.
C) to meet legal reserve requirements.
D) above the legally required amount.

Question

Quizplus · Accepted Answer

Excess reserves are reserves that banks keep above the legally required amount. This means that banks hold onto more money than what is required by law, and these extra reserves can be used to lend to other banks or to invest in other ways. Holding excess reserves can be seen as a precautionary measure to ensure that banks have enough cash on hand to meet unexpected demands from customers or to cope with any disruptions in the financial system.

Excess Reserves Are Reserves That Banks Keep