Use the balance sheet for the following questions.
Table 29-3

-Refer to Table 29-3.If the reserve requirement is 20 percent,this bank
A)has $10,000 of excess reserves.
B)needs $10,000 more reserves to meet its reserve requirements.
C)needs $5,000 more reserves to meet its reserve requirements.
D)just meets its reserve requirement.

Question

Use the balance sheet for the following questions.
Table 29-3
 
-Refer to Table 29-3.If the reserve requirement is 20 percent,this bank
A)has $10,000 of excess reserves. 
B)needs $10,000 more reserves to meet its reserve requirements. 
C)needs $5,000 more reserves to meet its reserve requirements. 
D)just meets its reserve requirement.

Quizplus · Accepted Answer

The reserve requirement is 20% of deposits, which is $25,000 x 20% = $5,000. The bank currently has total reserves of $15,000, but $10,000 of those reserves are required reserves. Therefore, the bank only has $5,000 of excess reserves and needs an additional $5,000 to meet its reserve requirements.

Use the Balance Sheet for the Following Questions