Suppose that from a new checkable deposit,First National Bank holds two million dollars in vault cash,eight million dollars on deposit with the Federal Reserve,and nine million dollars in excess reserves. Given this information,we can say First National Bank faces a required reserve ratio of ________ percent.

Question

Quizplus · Accepted Answer

The required reserve ratio is calculated based on the amount of reserves a bank is required to hold against deposits. Here, First National Bank has $9 million in excess reserves, which means these are not needed to meet the reserve requirement. The bank also has $8 million on deposit with the Federal Reserve, which, along with the $2 million in vault cash (totaling $10 million), is used to meet the reserve requirement. Since the $10 million in reserves (vault cash + Federal Reserve deposit) is not considered excess, it represents the required reserves. Given that this is the amount needed to back new checkable deposits and is not excess, it implies that the $10 million is 100% of the required reserves. If $9 million is excess, then the total deposits could be calculated by considering that the excess reserves are over and above the required reserves. However, without knowing the total deposits, we can infer the reserve ratio by understanding that the bank holds more than the minimum required (excess reserves are present), indicating compliance with a reserve ratio but not directly determining it from the given information. The calculation or direct percentage cannot be accurately determined without knowing the total amount of deposits. My explanation initially aimed to infer a direct calculation, but upon reflection, it's clear that the specific reserve ratio cannot be determined without additional information about the total deposits. The correct approach to answering this question would involve understanding the relationship between required reserves, excess reserves, and total deposits, which isn't directly calculable from the information provided.

Suppose That from a New Checkable Deposit,First National Bank Holds