Suppose a commercial bank has checkable deposits of $100,000 and the legal reserve ratio is 10 percent. If the bank's required and excess reserves are equal, then its actual reserves
A) are $1,000,000.
B) are $10,000.
C) are $20,000.
D) cannot be determined from the given information.

Question

Quizplus · Accepted Answer

The legal reserve ratio is given as 10%, which implies that the required reserves are $10,000 (10% of $100,000). Since the bank's required and excess reserves are equal, the bank must be holding twice the amount of the required reserves, which gives us $20,000 in actual reserves.

Suppose a Commercial Bank Has Checkable Deposits of $100,000 and the Legal