$$\begin{array} { | l | r | l | l | }
\hline & & \text { Assets } & \text { Liabilities and Net Worth } \
\hline \text { Stock Shares } & \$ 400 & & \
\hline \text { Reserves } & 40 & & \
\hline \text { Property } & 300 & & \
\hline \text { Securities } & 160 & & \
\hline \text { Loans } & 80 & & \
\hline \text { Demand Deposits } & 180 & & \
\hline
\end{array}$$ The ?gures in the table are for a single commercial bank, Bank A. All ?gures are in thousands of dollars. If the reserve ratio is 10 percent and a check for $10,000 is drawn and cleared in favor of Bank B, then Bank A will end
Up with excess reserves of
A) $8,000.
B) $12,000.
C) $13,000.
D) $18,000.

Question

$$\begin{array} { | l | r | l | l | } 
\hline & & \text { Assets } & \text { Liabilities and Net Worth } \
\hline \text { Stock Shares } & \$ 400 & & \
\hline \text { Reserves } & 40 & & \
\hline \text { Property } & 300 & & \
\hline \text { Securities } & 160 & & \
\hline \text { Loans } & 80 & & \
\hline \text { Demand Deposits } & 180 & & \
\hline
\end{array}$$ The ?gures in the table are for a single commercial bank, Bank A. All ?gures are in thousands of dollars. If the reserve ratio is 10 percent and a check for $10,000 is drawn and cleared in favor of Bank B, then Bank A will end
Up with excess reserves of
A) $8,000.
B) $12,000.
C) $13,000.
D) $18,000.

Quizplus · Accepted Answer

Initially, Bank A has reserves of $40,000. When a check for $10,000 is drawn and cleared, its reserves decrease by $10,000, leaving it with $30,000 in reserves. With demand deposits of $180,000, the required reserves at a 10% reserve ratio are $18,000 ($180,000 * 10%). Therefore, after the check is cleared, Bank A has excess reserves of $30,000 (actual reserves) - $18,000 (required reserves) = $12,000. However, the question asks for the situation after the check is cleared, implying the initial calculation did not account for the reduction in demand deposits due to the check. Correcting this oversight: the demand deposits would decrease to $170,000 after the check is cleared, requiring reserves of $17,000 ($170,000 * 10%). Thus, the excess reserves are actually $30,000 - $17,000 = $13,000.

The ?Gures in the Table Are for a Single Commercial