Suppose a bank has $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 5 percent.If the Federal Reserve lowers the required reserve ratio to 3 percent,then the bank will now have excess reserves of

Question

Quizplus · Accepted Answer

With a 5% reserve requirement on $100,000, the bank needs to hold $5,000 in reserves. Lowering the requirement to 3% means the bank now needs to hold only $3,000 in reserves. Therefore, the bank has $2,000 in excess reserves ($5,000 - $3,000).

Suppose a Bank Has $100,000 in Checking Account Deposits with No