The following is a consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent. Refer to the above information.The amount of excess reserves is:
A)$20 billion.
B)$60 billion.
C)$120 billion.
D)$600 billion.

Question

The following is a consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.  Refer to the above information.The amount of excess reserves is:
A)$20 billion. 
B)$60 billion. 
C)$120 billion. 
D)$600 billion.

Quizplus · Accepted Answer

Excess reserves are the amount by which actual reserves exceed required reserves. Required reserves can be calculated by multiplying total deposits by the desired reserve ratio (20%). Required reserves = 3000 x 0.20 = 600. Actual reserves are given as 800, so excess reserves = 800 - 600 = 200. However, the question asks for excess reserves for the entire chartered banking system, so we need to multiply by the number of banks in the system (300): 200 x 300 = 60,000 or $60 billion. Therefore, the correct answer is B.

The Following Is a Consolidated Balance Sheet for the Chartered