The manager of the bank where you work tells you that the bank has $200 million in deposits and $24.5 million dollars in loans. If the reserve requirement is 6 percent, how much is the bank holding in excess reserves?

Question

Quizplus · Accepted Answer

The bank is required to hold 6% of $200 million in reserves, which is $12 million. Since it has $24.5 million in loans, the remaining amount from the deposits is $175.5 million. Therefore, the excess reserves are the total reserves minus required reserves: $200 million - $175.5 million - $12 million = $12.5 million.

The Manager of the Bank Where You Work Tells You