Statement I: If a bank has negative excess reserves,its required reserves are greater than its actual reserves.
Statement II: Ideally banks prefer to keep zero excess reserves.

Question

Quizplus · Accepted Answer

Statement I is true because negative excess reserves indicate that a bank's actual reserves are less than the required reserves, meaning the bank does not have enough reserves to meet the regulatory requirement. Statement II is generally true as banks aim to minimize excess reserves to maximize their profitability, though in practice, the desired level of excess reserves can vary based on economic conditions and regulatory requirements.

Statement I: If a Bank Has Negative Excess Reserves,its Required