Suppose you found $5000 hidden in your closet and deposited it in a demand deposit account at your bank.If the desired reserve ratio was 10 percent,how much would the deposit directly create in excess reserves?

Question

Quizplus · Accepted Answer

The deposit directly creates $4500 in excess reserves because the bank is required to keep 10% of $5000 as reserves, which is $500. The remaining $4500 is excess reserves.

Suppose You Found $5000 Hidden in Your Closet and Deposited