The table below shows the balance sheet of Eubank which holds no excess reserves.Assume that the required reserve ratio is 10%.If a student deposits $10,000 in cash into his checkable deposit account,Eubank will have _____ in excess reserves?
Table 14.1
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EUBANK
?
$$\begin{array} { | l | r | r | r | }
\hline \text { Assets } & { \text { Liabilities and Net Worth } } & \
\hline & & & \
\hline \text { Deposits at the Fed } & \$ 40,000 & \text { Checkable deposits } & \$ 500,000 \
\hline \text { Cash } & \$ 10,000 & \text { Net Worth } & \$ 20,000 \
\hline \text { Loans } & \$ 300,000 & & \
\hline \text { Securities } & \$ 150,000 & & \
\hline \text { Fed Stock } & \$ 20,000 & & \
\hline
\end{array}$$

Question

The table below shows the balance sheet of Eubank which holds no excess reserves.Assume that the required reserve ratio is 10%.If a student deposits $10,000 in cash into his checkable deposit account,Eubank will have _____ in excess reserves?
Table 14.1
?
EUBANK
?
$$\begin{array} { | l | r | r | r | } 
\hline \text { Assets } &  { \text { Liabilities and Net Worth } } & \
\hline & & & \
\hline \text { Deposits at the Fed } & \$ 40,000 & \text { Checkable deposits } & \$ 500,000 \
\hline \text { Cash } & \$ 10,000 & \text { Net Worth } & \$ 20,000 \
\hline \text { Loans } & \$ 300,000 & & \
\hline \text { Securities } & \$ 150,000 & & \
\hline \text { Fed Stock } & \$ 20,000 & & \
\hline
\end{array}$$

Quizplus · Accepted Answer

With the deposit of $10,000, the total checkable deposits become $510,000. The required reserves are 10% of $510,000, which is $51,000. Before the deposit, required reserves were 10% of $500,000, which is $50,000. The bank had $40,000 in deposits at the Fed and $10,000 in cash, totaling $50,000, exactly meeting its required reserves before the deposit. After the deposit, the bank's actual reserves increase to $60,000 ($40,000 at the Fed + $10,000 existing cash + $10,000 new cash deposit). With required reserves of $51,000 after the deposit, the bank has $60,000 - $51,000 = $9,000 in excess reserves.

The Table Below Shows the Balance Sheet of Eubank Which