Reserves are the assets that commercial banks hold with the central bank, which means they are assets of the commercial banks and liabilities of the central bank. Commercial banks hold reserves to maintain liquidity and to meet their obligations to their customers. Conversely, the central bank uses reserves to regulate the money supply and to manage the country's economy.

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Reserves Are

Question 39

Multiple Choice

Reserves are:

A) Assets of the central bank and liabilities of the commercial bank
B) Assets of the commercial banks and liabilities of the central bank
C) Liabilities of the commercial and central banks
D) Assets and liabilities for the central bank

Correct Answer: