Suppose a bank has $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 12 percent,then the bank will now have excess reserves of

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With a 10% reserve requirement on $100,000, the bank needs to hold $10,000 in reserves. When the requirement is raised to 12%, the bank needs to hold $12,000 in reserves. Since the bank initially held exactly what was required (10% of $100,000 = $10,000), increasing the requirement to 12% means it is now short by $2,000, hence -$2,000 in excess reserves.

Suppose a Bank Has $100,000 in Checking Account Deposits with No