Excess reserves are
A) checking deposits that are included in the M1 money supply but not the M2.
B) savings deposits that are included in the M2 money supply but not the M1.
C) actual reserves held by banks that exceed the legal requirement.
D) the portion of deposits that banks are required by the Fed to hold as reserves against their deposits.

Question

Quizplus · Accepted Answer

Excess reserves are actual reserves held by banks that exceed the legal requirement. This means that banks are holding more reserves than they are required to and they can potentially use these excess reserves to make additional loans, thus increasing the money supply.

Excess Reserves Are