Answered: On March 26, 2020, the Federal Reserve…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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On March 26, 2020, the Federal Reserve abolished reserve requirements (the required reserve ratio = 0%). What two major considerations led the Fed take such an unprecedented action

Definition Definition Capital reserves held by banks or financial institutions over and above the reserves that are required to be maintained by the regulator toward its liabilities and for internal controls. For commercial banks, excess reserve is the amount over the standard reserve as decided by the central bank. These excess reserve funds are available in the form of cash and cash equivalents.

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Reserve requirements refer to the process of keeping aside a fixed percentage of deposits as reserves for times when there are large number of depositors who wish to withdraw money.

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