Suppose a bank has $100 million in chequable deposits, and the desired reserve ratio is 0.1.The bank has $5 million in actual reserves.What are the excess reserves?

Question

Quizplus · Accepted Answer

The desired reserve ratio is 0.1, which means the bank should hold 10% of the chequable deposits as reserves. Therefore, the required reserves for the bank are $10 million (10% of $100 million). However, the bank only has $5 million in actual reserves. So, the excess reserves would be the difference between required reserves and actual reserves, which is $5 million (i.e. $10 million - $5 million = $5 million).

Suppose a Bank Has $100 Million in Chequable Deposits, and the Desired