Table 29-4 The following information pertains to the Bank of Edmonton.

-Refer to Table 29-4.If the Bank of Canada requires banks to hold 5 percent of deposits as reserves, how much in excess reserves does the Bank of Edmonton now hold?
A)$5
B)$25
C)$50
D)$55

Question

Table 29-4 The following information pertains to the Bank of Edmonton.
 
-Refer to Table 29-4.If the Bank of Canada requires banks to hold 5 percent of deposits as reserves, how much in excess reserves does the Bank of Edmonton now hold?
A)$5 
B)$25 
C)$50 
D)$55

Quizplus · Accepted Answer

The Bank of Edmonton has $1,000 in deposits, so if the Bank of Canada requires them to hold 5 percent in reserves, they would need to hold $50 (5% of $1,000) in reserves. The bank is currently holding $100 in reserves, which means they have $50 in excess reserves ($100 - $50 = $50). Therefore, the correct answer is (C) $50.

Table 29-4 the Following Information Pertains to the Bank of Edmonton