17-16 Because cash reserves at the Federal Reserve do not earn interest,DIs do not hold any excess cash reserves beyond the minimum requirements.

Question

Quizplus · Accepted Answer

While it is true that cash reserves at the Federal Reserve do not earn interest, some DIs may hold excess reserves beyond the minimum requirements for various reasons, such as to meet unexpected cash demands or to take advantage of short-term investment opportunities. However, holding excess reserves comes at a cost, as DIs could have invested the funds elsewhere to earn a return.

17-16 Because Cash Reserves at the Federal Reserve Do Not