Final answer:
Volatile deposits refer to funds kept in financial institutions that can be withdrawn without notice and are subject to change in value. They are related to the concepts of liquidity and bank reserve requirements and are significant during financial uncertainty.
Step-by-step explanation:
The term volable deposits likely refers to a typo and should be volatile deposits, which pertains to funds kept in financial institutions that can be withdrawn without notice. These are often forms of bank deposits which are liable to sudden and unpredictable changes in value, due to market conditions or large withdrawals, and include checking accounts, savings accounts, and money market accounts. On the other hand, less volatile deposits would typically include more stable investments such as certificates of deposit (CDs) where the depositor agrees to leave money in the bank for a set period.
Volatile deposits are critical for understanding liquidity in the financial system. They are a key factor in the maintenance of a bank's reserve requirements, as they require banks to hold a fraction of the deposits in reserve so they can satisfy withdrawal requests. During periods of financial uncertainty or crisis, volatile deposits can lead to bank runs if a significant number of depositors attempt to withdraw their funds simultaneously.