Question

Excess reserves refer to the


difference between a bank's vault cash and its reserves deposited at the Reserve Bank


minimum amount of actual reserves a bank must keep on hand to back up its customers deposits


difference between actual reserves and loans


differences between actual reserves and required reserves

Answer 1

Excess reserves refer to the **difference between actual reserves and required reserves**.

In banking, actual reserves are the total amount of funds a bank has on hand (including cash in vaults and reserve balances at the central bank), while required reserves are the minimum amount of reserves that a bank must hold to back up customer deposits, as mandated by regulation. Excess reserves are any reserves held by the bank that exceed this required minimum.