Suppose the ABC bank has excess reserves of $4,000 and outstanding checkable deposits of $80,000. If the reserve requirement is 25 percent, what is the size of the bank's actual reserves?
A) $16,000
B) $84,000
C) $24,000
D) $20,000

Question

Quizplus · Accepted Answer

The reserve requirement is 25%, so the required reserves are 25% of $80,000, which is $20,000. The bank has excess reserves of $4,000, so its actual reserves must be the sum of its required reserves and its excess reserves, which is $20,000 + $4,000 = $24,000. Therefore, choice C is the correct answer.

Suppose the ABC Bank Has Excess Reserves of $4,000 and Outstanding