Question

Suppose a bank has​ $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve raises the required reserve ratio to 15​ percent, then the bank will now have excess reserves of
A) $0
B) $2 million
C) $8 million
D) $10 million

Answer 1

Answer:

A) $0

Explanation:

with 100 million in checking account, and required reserve ratio in 10%

the bank need to hold 10 millions

IFthe Federal Reserve raises the required reserve ratio to 15% then it will need hold 15 millions

This bank has none excess reserves