A question from one of IrfaNullah videos is the following: For a deposit-taking bank, holding reserves with the national central bank is: A. a requirement, B. an opportunity cost, C. an opportunity to receive interest on excess funds. It says in the video that option A is not the correct answer since this is not a requirement in all the countries. It also states that option C is not true and the right answer is option B. However, I think that holding reserves with the national central bank is not an opportunity cost because opportunity cost is the benefit that could have been received had the reserves not been held with the national bank and been used in an alternative way. In other words, opportunity cost of my $1,000 is the profit that I could have made as a result of investing and not holding as a reserve.
I agree that option A and C are not correct, but I seem to struggle in finding the correct answer in option B.
Any help will be appreciated with this regard.
Thanks in advance.