Statement I: Before January,2008,banks had no incentive to hold excessive reserves.
Statement II: Actual reserves minus required reserves equals excess reserves.

Question

Quizplus · Accepted Answer

Before January 2008, banks typically had no incentive to hold excessive reserves because they did not earn interest on them. Statement II is a definition of excess reserves, which is correct.

Statement I: Before January,2008,banks Had No Incentive to Hold Excessive