[Solved] Which of the following statements about excess reserves is correct? — Ans: Excess reserves are reserves held by banks beyond the required CRR | Financial Awareness

Financial Awareness - Risk, Stability & Emerging Finance

Which of the following statements about excess reserves is correct?

AExcess reserves are the total deposits banks receive

BExcess reserves are reserves held by banks beyond the required CRR

CExcess reserves are loans given to customers

DExcess reserves are the cash held by customers outside banks

Step-by-Step Solution

Step 1: Define excess reserves
Excess reserves refer to the amount banks hold over and above the mandatory reserves required by CRR.
Step 2: Analyze options
Only the option stating reserves beyond required CRR correctly defines excess reserves.
Final Answer:
Excess reserves are reserves held by banks beyond the required CRR → Option B
Quick Check:
Excess reserves = reserves beyond mandatory CRR ✅

Quick Trick: Excess reserves = total reserves minus required reserves.

Common Mistakes:

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