Banks are not allowed to hold reserves in excess of those required by law.

Question

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Banks are allowed to hold reserves in excess of those required by law, and in fact, many banks do so as a precautionary measure to ensure that they have enough funds available to cover unexpected losses or withdrawals. The amount of excess reserves held by banks can also be influenced by factors such as market conditions, interest rates, and lending activity.

Banks Are Not Allowed to Hold Reserves in Excess of Those