Banks hold some deposits on reserve at the Fed because
A)the Fed requires every bank to hold at least $100 million on deposit at all times.
B)the Fed will insure those deposits, but will not insure regular bank deposits.
C)these are membership dues for being a member bank.
D)these deposits meet the reserve requirements of the Fed.

Question

Quizplus · Accepted Answer

Banks hold some deposits on reserve at the Fed because these deposits meet the reserve requirements of the Fed. The amount a bank must hold in reserve depends on the size of its deposits and is set by the Fed. By holding reserves at the Fed, banks are able to ensure that they can meet their daily payment obligations and with the added benefit of earning interest on those reserves.

Banks Hold Some Deposits on Reserve at the Fed Because