Question

Bank A has checkable deposits of $10 million and total reserves of $1 million. The required reserve ratio is 9 percent. The bank has excess reserves of

Answer 1

Answer:

The bank has excess reserves of $100,000.

Explanation:

The deposits here are $10 million.

The required reserve ratio is 9%.

The required reserve will be,

=reserve ratio*total deposits

=9/100*$10,000,000

=$900,000

Here, the required reserve is $900,000.

So, the excess reserve will be,

=total reserve - required reserve

=$(1,000,000-900,000)

=$100,000