AP MacroeconomicsMoney & Monetary Policy
Vault Cash
Vault cash is the physical currency a bank keeps on its premises; it counts toward the bank's reserves alongside its deposits at the Fed.
A bank's total reserves equal its vault cash plus its deposit balances held at the Federal Reserve. Vault cash lets banks meet day-to-day withdrawals and, together with Fed deposits, determines whether the bank is holding required reserves and any excess reserves. On the AP exam, remember that vault cash is an asset of the bank but is NOT counted in M1 (currency in circulation excludes cash sitting in bank vaults).
Formula / Example
Total reserves = Vault cash + Deposits at the Fed