Chapter 13, Problem 2.8P

To determine

the reasons for which the reserves held by a bank amount only to a fraction of its deposit liabilities and the importance of depositor’s confidence in their banks health is to be determined.

Concept Introduction:

Depository institutions are bank, building society, credit union, or other financial institution that solicits and accepts savings of the general public as demand deposits or time deposits, and pays a fixed or variable rate of interest.