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Oduvanchick [21]
2 years ago
7

Assume banks are required to hold reserves equal to 20 percent of deposits. Instructions: Enter your responses as a whole number

. a. How much excess reserves does the bank hold
Business
1 answer:
stellarik [79]2 years ago
4 0

Answer: $100

Explanation:

If the reserve requirement is 20% then the required reserves being held by the company is:

= Total deposits * reserve requirement

= 8,000 * 20%

= $1,600

The reserves held by the company of $1,700 comprise of both the required reserves and the excess reserves. The excess reserves will therefore be calculated as:

Excess reserves = Reserves - Required reserves

= 1,700 - 1,600

= $100

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