Earning Assets
What it is:
Earning assets are assets that generate income like interest or dividends.
How it works/Example:
Why it matters:
For individuals, earning assets can be useful in funding retirement; for companies, earning assets often are places to deposit excess cash. Because many types of earning assets are offered by banks, the supply of earning assets is often dictated by the amount of excess reserves banks have. This is one reason that reserve requirements affect interest rates.