help Short Answer: Keep it concise. What are excess reserves and why might a bank want...

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Question

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Answer 1

Answer #1

Excess reserves are capital reserves. They are held by a bank or financial institutions

in excess of what is required by regulators, creditors. The interest rate on excess reserves is now

being used in coordination with the fed funds rate to encourage bank behaviour that supports

the federal reserve ‘s targets.

the interest paid on these reserves is paid out in cash and recorded as interest

income.

Answer 2

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