What are "excess reserves" for a commercial bank?

Question

Quizplus · Accepted Answer

Excess reserves are reserves (cash or deposits with the central bank) that a commercial bank holds over and above its desired reserves. It provides the bank with a buffer against unexpected deposit withdrawals or loan demands. Banks can also earn interest on their excess reserves held with the central bank. Option A is incorrect since excess reserves are not related to the bank's supply of gold. Option B is incorrect since chequable deposits are not considered as reserves. Option D is incorrect since required reserves are the reserves that the central bank requires commercial banks to hold. Option E is incorrect since excess demand for money refers to a situation where the demand for money in the economy exceeds the supply of money.

What Are "Excess Reserves" for a Commercial Bank