A bank faces a required reserve ratio of 5 percent. If the bank has $200 million of checkable deposits and $15 million of total reserves, then how large are the bank's excess reserves?
A) $0
B) $5 million
C) $10 million
D) $15 million

Question

Quizplus · Accepted Answer

Required reserves = 5% of $200 million checkable deposits = $10 million. Total reserves = required reserves + excess reserves, so excess reserves = total reserves - required reserves = $15 million - $10 million = $5 million.

A Bank Faces a Required Reserve Ratio of 5 Percent