Scenario 11-1
A bank's assets consist of $500 000 in total reserves, $1 600 000 in loans, and a building worth $1 200 000. Its liabilities and capital consist of $2 000 000 in demand deposits and $1 300 000 in capital.
-Refer to Scenario 11-1.If the desired reserve ratio is 20 percent,what is the level of the bank's excess reserves and how much could it loan out as a result?

Question

Quizplus · Accepted Answer

The bank's required reserves are 20% of $2,000,000 in demand deposits, which is $400,000. With total reserves of $500,000, the excess reserves are $100,000, which is the amount it could loan out.

Scenario 11-1 A Bank's Assets Consist of $500 000 in Total Reserves