What are reserves? Discuss the various types of reserves used in the U.S. banking system
What will be an ideal response?
Reserves are assets held by a depository institution that are used to meet withdrawal demands. In the U.S. Federal Reserve System, reserves include deposits held by Federal Reserve district banks for depository institutions plus the vault cash in the depository institution. Total reserves are anything that the law allows banks to claim as reserves. Required reserves are the value of reserves the depository institution must hold and excess reserves are the reserves the institution holds in excess of the required reserves.
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Refer to the figure above. If there is wage rigidity in the market, how much unemployment is created when the labor demand curve shifts to LD2?
A) 20 units of labor B) 30 units of labor C) 10 units of labor D) 40 units of labor
The Securities and Exchange Commission of the U.S. government requires that mutual fund companies publish a long and detailed prospectus which covers an array of areas including the cost of owning the fund, the types of stocks the fund invests in,
the management fee, administrative fees and an assessment of the type of risk that holding the fund represents. This is clearly designed with the intent of mitigating the imperfect information problem. However, can you think of any reason why the value of these documents is likely to be quite marginal?