ECON102: Principles of Macroeconomics

Watch these videos, which offer another perspective on fractional reserve banking. Note that total reserves are the checkable deposits the public keeps in a commercial bank. Required reserves are a percentage of the checkable deposits commercial banks must keep on hand, as required by the Federal Reserve. These reserves protect banks if customers "run" the bank (show up to collect their deposits), such as during periods of financial instability and panic. Excess reserves are the percentage of checkable deposits the Federal Bank allows banks to lend to their customers.