Suppose that from a new checkable deposit,First National Bank holds two million dollars in vault cash,eight million dollars on deposit with the Federal Reserve,and nine million dollars in excess reserves. Given this information,we can say First National Bank has ________ million dollars in required reserves.

Question

Quizplus · Accepted Answer

Given that the bank has $9 million in excess reserves and still has money in vault cash and on deposit with the Federal Reserve, the required reserves must be the difference between total reserves and excess reserves. Total reserves are the sum of vault cash ($2 million) and deposits with the Federal Reserve ($8 million), which equals $10 million. Subtracting the excess reserves ($9 million) from the total reserves ($10 million) gives $1 million in required reserves.

Suppose That from a New Checkable Deposit,First National Bank Holds