The commercial banks on Sunny Island have checking deposits of $4 million, reserves of $600,000, and loans of $2.4 million. The desired reserve ratio is 10 percent. The banks have of desired reserves and of excess reserves.

Question

Quizplus · Accepted Answer

The desired reserves are 10% of $4 million, which is $400,000. The banks have $600,000 in reserves, so the excess reserves are $600,000 - $400,000 = $200,000.

The Commercial Banks on Sunny Island Have Checking Deposits of $4