Table 10-2

-Refer to the Table 10-2.If the reserve requirement is 10 percent and then someone deposits $50 000 into the bank,what is the bank's reserve position?
A)It will have $57 000 in excess reserves.
B)It will have $52 000 in excess reserves.
C)It will need to raise reserves by $5000.
D)It will have excess reserves of $2000.

Question

Table 10-2
 
-Refer to the Table 10-2.If the reserve requirement is 10 percent and then someone deposits $50 000 into the bank,what is the bank's reserve position?
A)It will have $57 000 in excess reserves. 
B)It will have $52 000 in excess reserves. 
C)It will need to raise reserves by $5000. 
D)It will have excess reserves of $2000.

Quizplus · Accepted Answer

If the reserve requirement is 10 percent, the bank must keep 10% of the deposit, which is $5000 as reserves. The bank can lend out the remaining $45 000. Since the deposit is made into the bank, there are no required reserves to begin with. Therefore, the bank will have $5000 in required reserves and $47 000 in excess reserves ($52 000 - $5000).

Table 10-2 -Refer to the Table 10-2.If the Reserve Requirement Is 10