Question

Suppose that the Federal Reserve has set the required reserve ratio at 0.20 (that is, 20%). Second Republic Bank currently has $150,000 in checkable deposits and $45,000 in outstanding loans. How much money is Second Republic Bank required to hold in reserve in this case

Answer 1

Answer:

Reserves = $105,000

Required reserve = $30,000

Excess reserve = $75,000

Explanation:

Given:

Required reserve ratio = 0.20

Check able deposit = $150,000

Outstanding loans = $45,000

Computation:

Reserves = Check able deposit - Outstanding loan

Reserves = $150,000 - $45,000

Reserves = $105,000

Required reserve = Check able deposit[Required reserve ratio]

Required reserve = $150,000[0.20]

Required reserve = $30,000

Excess reserve = Reserves - Required reserve

Excess reserve = $105,000 - $30,000

Excess reserve = $75,000