The figure given below represents the saving function of an economy.
Figure 9.1
-Refer to Figure 9.1. At the real GDP level of $400 billion, which of the following statements is true?
Definitions:
Negative Excess Reserves
A situation where banks hold less in reserves than what is required by regulations, a condition that could lead to liquidity issues.
Required Reserves
The minimum amount of funds that a bank must hold in reserve against specified deposit liabilities.
Actual Reserves
Actual reserves refer to the total amount of funds that a bank has on deposit at the Federal Reserve bank of its district, plus its vault cash, constituting its total legal reserves.
Fiscal Policy
Governmental policies regarding taxation and spending to influence the economy.
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