Statement I: Very large banks have to hold 10% of their demand deposits over $55.2 million on reserve.
Statement II: A bank that does not hold sufficient reserves can borrow reserves from another bank that has some excess reserves,or it can borrow at the discount window of its Federal Reserve District Bank.

Question

Quizplus · Accepted Answer

Both statements are true. The first statement refers to the reserve requirement set by the Federal Reserve for very large banks, which is currently 10% of deposits above $55.2 million. The second statement explains how a bank can obtain reserves if it doesn't meet the requirement, either by borrowing from another bank or through the discount window operated by its Federal Reserve District Bank.

Statement I: Very Large Banks Have to Hold 10% of Their