Refer to the information provided in Table 25.8 below to answer the question(s) that follow.
Table 25.8
-Refer to Table 25.8. If the required reserve ratio were changed to 10% and Alamo Bank continues to hold $1,200,000 in reserves, its excess reserves will be

Question

Refer to the information provided in Table 25.8 below to answer the question(s) that follow.
Table 25.8 
-Refer to Table 25.8. If the required reserve ratio were changed to 10% and Alamo Bank continues to hold $1,200,000 in reserves, its excess reserves will be

Quizplus · Accepted Answer

The required reserve ratio is currently 15%, which means that Alamo Bank needs to hold 15% of its deposits in reserve. In other words, if Alamo Bank has $10 million in deposits, it needs to hold $1.5 million in reserves.

If the required reserve ratio were changed to 10%, this means that Alamo Bank would need to hold a lower percentage of its deposits in reserve. Using the same example as before, Alamo Bank would only need to hold $1 million in reserves instead of $1.5 million.

However, Alamo Bank is still holding $1.2 million in reserves, which is higher than the required reserve amount of $1 million. This means that Alamo Bank has excess reserves of $200,000.

To calculate the excess reserves if the required reserve ratio were changed to 10%, we can first calculate the new required reserve amount:

New required reserves = 10% * $10 million = $1 million

Since Alamo Bank is still holding $1.2 million in reserves, its excess reserves would be:

Excess reserves = $1.2 million - $1 million = $200,000

Therefore, the answer is C) $600,000.

Refer to the Information Provided in Table 25