Question

Question 13 (1 point)

Which of the following is a liability of a commercial bank?

Question 13 options:

	vault cash
	loans
	deposits at the Federal Reserve
	checking deposits

Answer 1

Answer- Vault cash

Reason- "Vault cash" is the money that a bank will keep on premises, to deal with their day-to-day cash needs.

This, along with their reserve balance at the central bank, makes up a bank's total reserve.

Vault cash and reserve balances are almost the same
thing; together with cash in circulation, they make up the
monetary base.

When a bank needs more cash for its customers, it exchanges part of its account balance at the, Fed for physical cash, and when it holds more cash than it needs, it deposits that cash into its reserve account.

Both cash and reserves are liabilities of the central bank, and
only the central bank can create or destroy those liabilities.

These are two distinct classes of money, and they are not
interchangeable; liabilities of the central bank.

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