The quantity of the $1,000 deposit is the bank required to keep in reserves is 20%.
What is a reserve deposit?
A reservable deposit would be any bank deposit subject to bank reserves established by the Federal Reserve Bank of the United States.
Some key features of reserve deposit are-
- Through the mechanism of fractional reserve banking, such a deposit could be used in part as a loan.
- The remaining portion, as established by the Fed's bank reserves, must be kept by bank & made available for prompt withdrawal upon request.
- A reservable bank is a banks deposit that is subject to the reserve requirement guidelines of the Federal Reserve.
- Transaction (checking) savings account, savings accounts, as well as non-personal time deposits are all examples of reservable deposits.
- Sweep accounts, often known as money market funds, is non-reservable deposit account that generate a greater rate of interest than reservable deposit accounts.
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