The table below shows the balance sheet of Eubank which holds no excess reserves.Assume that the required reserve ratio is 10%.If a student deposits $10,000 in cash into his checkable deposit account,Eubank will have _____ in excess reserves?
Table 14.1

EUBANK

Question

The table below shows the balance sheet of Eubank which holds no excess reserves.Assume that the required reserve ratio is 10%.If a student deposits $10,000 in cash into his checkable deposit account,Eubank will have _____ in excess reserves?​ ​
Table 14.1
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EUBANK

Quizplus · Accepted Answer

Since the required reserve ratio is 10%, Eubank must hold 10% of the total checkable deposits as reserves. Currently, the checkable deposits are $100,000, so Eubank must hold $10,000 in reserves. Before the student's deposit, Eubank has no excess reserves. However, when the student deposits $10,000 in cash, the checkable deposits increase to $110,000. Eubank must now hold $11,000 in reserves, but it only has $10,000, leaving $1,000 in excess reserves. Therefore, the correct answer is C, $9,000.

The Table Below Shows the Balance Sheet of Eubank Which