A bank has $100,000 in checkable deposits and $30,000 in reserves. If the required reserve ratio is 10%, what is the amount of excess reserves?
A) $0
B) $10,000
C) $20,000
D) $30,000

Question

Quizplus · Accepted Answer

The required reserve ratio is 10% which means that the bank is required to keep 10% of its checkable deposits in reserves. Therefore, the required reserves for the bank are $100,000 x 0.10 = $10,000. Since the bank has $30,000 in reserves, the excess reserves would be $30,000 - $10,000 = $20,000. Therefore, the correct answer is (C) $20,000 as this is the amount of excess reserves the bank has.

A Bank Has $100,000 in Checkable Deposits and $30,000 in Reserves