Which of the following is TRUE about interest rates offered by financial Intermediaries? * A.The interest rates issued by financial intermediaries are standard across different financial institutions. B. Interest rates paid by DSUs are lower and SSUs are paid with higher interest rates. C. Interest rates issued by financial intermediaries are based solely on the issuance of central banks. D. Interest rates paid to SSUs are lower compared to the interest they collect to DSUs.

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Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.