Assume banks like to keep 10 percent of deposits on reserve. If a bank has excess reserves of $25 million and demand deposits of $500 million, what amount is the bank's total reserves?

Question

Quizplus · Accepted Answer

The bank's required reserves are 10% of $500 million, which is $50 million. Since the bank has $25 million in excess reserves, the total reserves are $50 million + $25 million = $75 million.

Assume Banks Like to Keep 10 Percent of Deposits on Reserve