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When all banks have zero excess reserves to start and you write a check that is deposited in another bank it is true that?
Wiki User
∙ 12y ago
the system will have decreased its reserves.
due to the fact that a check is a liability that the bank has to cover for.
does anyone else have a better explanation?
lol
Wiki User
∙ 12y ago
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Which of the following most accurately describes what banks do with their excess reserves?
Banks use excess reserves to make loans to customers so that they can make profits on the interest.
Why do banks try to keep excess reserves as low as possible?
Because, the excess reserves they hold are going to stay idle in their vaults (safe deposit boxes) and are not going to earn any money for them. Instead if they loan it out to customers, they can earn an interest on the same. So banks try to keep their excess reserves as low as possible.
Why do banks hold excess reserves?
They would hold excess reserves when conditions are such that they earn very little, or risks of loss are greater than interest reward or as now, 2/1/12, when the Federal Reserve is actually paying interest to the banks to keep reserves. There's now about $1.4 trillion of excess reserves of banks held at the Fed. It resulted from the Fed stuffing the bank "persons" with money lent at near zero interest to replace that which the banks destroyed with the liar loans and CDO- CDS securities. While 13 million human persons are unemployed, it's nutty to maintain such credit scarcity. But that's "free enterprise."
How do banks create money with fractional reserves?
because
Does purchase of government bonds from the public by the federal reserve banks increases commercial banks reserves?
yes
What banks do when they do not have excess reserves?
reserving bank
Which of the following most accurately describes what banks do with their excess reserves?
Banks use excess reserves to make loans to customers so that they can make profits on the interest.
What do banks do with their excess reserves?
Banks use excess reserves to make loans to customers so that they can make profits on the interest Commercial banks cannot use excess reserves to make common loans. They can only use them to make loans to other banks who may need more required reserves. Excess reserves increase the monetary base but do not enter the M1 or M2 money supply. The only entity that can effect the total excess reserves is the Federal Reserve. When the fed decides to reduce its balance sheet, it will sell assets in the market and reduce an equal amount of excess reserves.
What are the funds that banks use to satisfy the reserve requirement?
excess reserves
Why do banks try to keep excess reserves as low as possible?
Because, the excess reserves they hold are going to stay idle in their vaults (safe deposit boxes) and are not going to earn any money for them. Instead if they loan it out to customers, they can earn an interest on the same. So banks try to keep their excess reserves as low as possible.
As commercial banks keep more excess reserves, what happens to money creation?
It decreases.
When corporations retire or pay off loans from commercial banks do excess reserves increased or decreased?
DECREASE
Why do banks hold excess reserves?
They would hold excess reserves when conditions are such that they earn very little, or risks of loss are greater than interest reward or as now, 2/1/12, when the Federal Reserve is actually paying interest to the banks to keep reserves. There's now about $1.4 trillion of excess reserves of banks held at the Fed. It resulted from the Fed stuffing the bank "persons" with money lent at near zero interest to replace that which the banks destroyed with the liar loans and CDO- CDS securities. While 13 million human persons are unemployed, it's nutty to maintain such credit scarcity. But that's "free enterprise."
State banks in which President Jackson deposited government revenues?
Pet Banks
Means of resolving the recent recession in the US America?
Reduce interest rates to 1 percent. No matter how low you make the interest rates. People are scared to borrow money. Banks are scared to lend. Banks do not want to lend out their excess reserves.
Which of these was one of the chief reasons for bank failures in 1929-1930?
Banks were not holding require reserves to cover withdrawals.
How do banks create money with fractional reserves?
because
