If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Cheerton now hold?
1 answer:
The quantity of excess reserves that the Bank of Cheerton now hold is $210
From the attached table, the amount generated on the reserve is $4,200
If the Fed's reserve requirement is 5 percent, then the quantity of excess reserves that the Bank hold is given as:
Quantity of excess reserves = 5% of $4,200
Quantity of excess reserves = 0.05 * 4200
Quantity of excess reserves = $210
Hence the quantity of excess reserves that the Bank of Cheerton now holds is $210.
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