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

Question

Quizplus · Accepted Answer

The required reserve ratio is 10%, so for a new checkable deposit, the required reserves would be 10% of the total deposit. Since the bank holds $8 million with the Federal Reserve and $9 million in excess reserves, the total deposit is $10 million. Therefore, the required reserves are 10% of $10 million, which is $1 million.

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