The reserves of the chartered banks are a(n):
A)asset to the chartered banks and an asset to the Bank of Canada.
B)asset to the chartered banks and a security to the Bank of Canada.
C)asset to the chartered banks and a liability to the Bank of Canada.
D)liability to the chartered banks and an asset to the Bank of Canada.

Question

Quizplus · Accepted Answer

The reserves of the chartered banks are an asset to the banks because it represents an amount of money they hold. However, it is also a liability to the Bank of Canada because the central bank must keep track of how much each bank holds and can use these reserves to influence the banking system's liquidity. Therefore, the correct answer is C as it recognizes that the reserves are an asset to the banks and a liability to the central bank.

The Reserves of the Chartered Banks Are A(n)