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The reserves of a commercial bank consist of:?

The reserves of a commercial bank consist of: A)the amount of money market funds it holds. B)deposits at the Federal Reserve Bank and vault cash. C)government securities that the bank holds. D)the bank's net worth.

Public Comments

1. b
2. The answer is B, Federal Reserve deposits + cash. Because reserves earn no interest, banks try to eliminate excess reserves, or reserves in excess of those required by regulation. They do this by investing in loans and securities.