Suppose a bank is exactly meeting its desired reserve ratio of 10 percent and a new deposit of $75,000 is made. Immediately after the deposit is made, the bank's unplanned reserves equal
A) zero.
B) $7,500.
C) $67,500.
D) It is impossible to determine without additional information.

Question

Quizplus · Accepted Answer

The new deposit increases the bank's reserves by $75,000. With a 10 percent reserve ratio, the bank plans to hold $7,500 (10% of $75,000) as required reserves. The remaining $67,500 ($75,000 - $7,500) is unplanned excess reserves, which the bank can lend out.

Suppose a Bank Is Exactly Meeting Its Desired Reserve Ratio