Adam decided to play a practical joke on Linda, a coworker. As Linda was leaving the office one night, Adam, wearing a mask, ste
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Missing information:
total deposits in bank XYZ = $4,000,000
total reserves = $3,800,000
Answer:
the required reserve = $250,000
excess reserves = $4,550,000
Explanation:
required reserve ratio = 5%
the Fed buys $1,000,000 worth of bonds
the $1,000,000 are deposited entirely in bank XYZ
total checkable deposits will increase to $5,000,000
the required reserve = $5,000,000 x 5% = $250,000
excess reserves = total checkable deposits - total loans - required reserves = $5,000,000 - $200,000 - $250,000 = $4,550,000
