Deposits by depository institutions with the Fed
A)are an asset to the Fed but a liability to the depository institutions.
B)are a liability to the Fed but an asset to the depository institutions.
C)represent all of the depository institutions reserves.
D)receive interest at market rates.

Question

Quizplus · Accepted Answer

Deposits by depository institutions with the Fed are recorded as liabilities on the Fed's balance sheet as they represent funds that the Fed owes to the depository institutions. However, these deposits are recorded as assets on the balance sheet of depository institutions, representing their claim on the Fed's resources. These deposits do not necessarily represent all of the depository institutions' reserves, as they can hold funds in other forms such as currency and reserves held at other banks. Deposits with the Fed also receive interest, but the rate is determined by the Fed, not market rates.

Deposits by Depository Institutions with the Fed