Total bank reserves equalGroup of answer choicescheckable deposits+vault cash+traveler's checksvault cash+currency in the hands of the nonbanking publicbank deposits at the Federal ReserveBank deposits at the Federal Reserve + vault cash
Question
Total bank reserves equalGroup of answer choicescheckable deposits+vault cash+traveler's checksvault cash+currency in the hands of the nonbanking publicbank deposits at the Federal ReserveBank deposits at the Federal Reserve + vault cash
Solution
Total bank reserves equal bank deposits at the Federal Reserve + vault cash.
Here's why:
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Bank reserves are the currency deposits which are not lent out to the bank's clients.
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A small fraction of the total deposits is held internally by the bank or deposited with the central bank.
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Minimum reserve requirements are established by central banks in order to ensure that the financial institutions will be able to provide clients with cash upon demand.
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Bank reserves consist of the money banks hold in their vaults plus their deposits at the Federal Reserve, hence the answer is "Bank deposits at the Federal Reserve + vault cash".
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