If a bank has $10 million of checkable deposits,a required reserve ratio of 10 percent,and it holds $2 million in reserves,then it will not have enough reserves to support a deposit outflow of
A)$1.2 million.
B)$1.1 million.
C)$1 million.
D)$900,000.

Question

Quizplus · Accepted Answer

The bank needs to maintain $1 million in reserves (10% of $10 million). With $2 million in reserves, it has $1 million in excess reserves. A $1.2 million outflow would leave it with only $800,000 in reserves, which is below the required $1 million.

If a Bank Has $10 Million of Checkable Deposits,a Required