A small commercial bank has $10,000 in actual reserves, $60,000 in deposits, and has a 10 percent desired reserve ratio. Its excess reserves are

Question

Quizplus · Accepted Answer

The desired reserves for the bank are 10% of deposits, which would be $6,000 (10% of $60,000). However, the bank already has $10,000 in actual reserves, so their excess reserves would be the difference between their actual reserves and desired reserves:

Excess reserves = Actual reserves - Desired reserves 
Excess reserves = $10,000 - $6,000 
Excess reserves = $4,000

Therefore, the correct choice is C.

A Small Commercial Bank Has $10,000 in Actual Reserves, $60,000