Respuesta :
The Legal reserves are assets a bank can employ to satisfy the fractional holding requirements and include only cash in the vault or deposits with the Fed.
What is the purpose of legal reserves?
Legal reserve is the amount that each domestic bank and foreign bank must always have on hand in order to pay their deposit liabilities in accordance with the terms of this subtitle.
Is legal reserve a liability?
Because reserves are included in the company's net worth, they are represented as liabilities. Accounting professionals credit the reserves account with the same amount as they debit the retained earnings account in order to record reserves.
What are the 3 types of reserves?
- General Reserves: These are those which are generally created without any specific purpose.
- Specific Reserves: These are those which created for some specific purpose and can be used only for those specific purposes. ...
- Revenue and Capital Reserves: This classification is done according to the nature of profits.
How do reserves work?
Instead of producing money, it effectively increases the amount of money in circulation. The Fed accomplishes this in a number of ways, one of which is by adjusting the target fed funds rate with the intention of influencing other interest rates. To increase bank reserves, it could also purchase Treasury securities on the open market.
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