Question

Look at the scenario money creation. how much of the $1,000 deposit is the bank required to keep in reserves?

Answer 1

The quantity of the $1,000 deposit is the bank required to keep in reserves is 20%.

What is a reserve deposit?

A reservable deposit would be any bank deposit subject to bank reserves established by the Federal Reserve Bank of the United States.

Some key features of reserve deposit are-

• Through the mechanism of fractional reserve banking, such a deposit could be used in part as a loan.
• The remaining portion, as established by the Fed's bank reserves, must be kept by bank & made available for prompt withdrawal upon request.
• A reservable bank is a banks deposit that is subject to the reserve requirement guidelines of the Federal Reserve.
• Transaction (checking) savings account, savings accounts, as well as non-personal time deposits are all examples of reservable deposits.
• Sweep accounts, often known as money market funds, is non-reservable deposit account that generate a greater rate of interest than reservable deposit accounts.

To know more about the reservable deposit, here

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