"A Bank Can Only Use Its Excess Reserves to Make

question 135

Essay

"A bank can only use its excess reserves to make loans, while required reserves can only be used to buy U.S. government securities." Explain whether the previous statement is correct or incorrect.

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Definitions:

Functional Currency

The currency of the primary economic environment in which an entity operates and carries out its transactions, used in its financial reporting.

Professional Judgment

The application of relevant training, knowledge, and experience in making informed decisions or opinions in a professional setting.

Straight-Line Basis

A method of calculating depreciation and amortization that allocates an equal amount of the asset's cost to each year of its useful life.

Functional Currency

The primary currency of the primary economic environment in which an entity operates, used in its financial reporting.