A bank has $50,000 in checking account deposits and loans of $49,000. Of the $49,000 loaned out, $43,000 remains in the checking accounts of the loan recipients. The bank has $50,000 cash on hand, and the reserve requirement is 25%. The amount of its excess reserves equals:

Question

Quizplus · Accepted Answer

Excess reserves = (Cash on hand + Deposits) - (Loans - Deposits in checking accounts of loan recipients) - (Required reserves)= (50,000 + 50,000) - (49,000 - 43,000) - (0.25 * (50,000 + 50,000))= 100,000 - 6,000 - 25,000= $26,750

A Bank Has $50,000 in Checking Account Deposits and Loans