Final answer:
When a bank moves $10 million from its Fed deposits to vault cash, its total reserves remain unchanged since it's transferring between forms of reserves.
Step-by-step explanation:
If a bank reduces its deposits at the Federal Reserve by $10 million and increases its vault cash by $10 million, the bank's reserves remain unchanged. Reserves consist of deposits banks hold at the Fed plus vault cash on hand. When the bank transfers $10 million from its Fed deposits to its vault cash, it is simply moving funds from one form of reserves to another, not changing the total amount of reserves. Therefore, the answer is that bank reserves remain unchanged.
Reserves that a commercial bank deposits with the Federal Reserve Bank are assets for the commecial bank and liabilities for itself.Because the money in reserves is cash that belongs to commercial banks, they are assets of such institutions and represent a claim they have over the Federal Reserve Bank. Because the reserves are money it owes and represent claims commercial banks have against it, the reserves deposited at the Fed are a liability to the Fed.
A company's assets are any possessions that have the potential to provide future financial gain. Your debts to other people are called liabilities.