Commercial bank reserves, most of which are held by the Federal Reserve Banks, are
A) a liability of the Federal Reserve Banks and commercial banks.
B) an asset of the Federal Reserve Banks and commercial banks.
C) a liability of the Federal Reserve Banks and an asset for commercial banks.
D) an asset of the Federal Reserve Banks and a liability for commercial banks.

Question

Quizplus · Accepted Answer

Reserves held by commercial banks at the Federal Reserve are considered a liability for the Federal Reserve (since the Fed owes these funds to the commercial banks) and an asset for commercial banks (as these are funds the banks can call upon).

Commercial Bank Reserves, Most of Which Are Held by the Federal