If a bank has $1 million of deposits,a required reserve ratio of 20 percent,and $300,000 in reserves,it need not rearrange its balance sheet if there is a deposit outflow of

Question

Quizplus · Accepted Answer

The required reserve ratio is 20%, thus the required reserves = 0.2 x $1 million = $200,000.
The current reserves held by the bank is $300,000 - which is in excess of the required reserves by $100,000.
Hence, the bank could sustain a deposit outflow of either A or B ($50,000 or $75,000) without having to rearrange its balance sheet as it currently has excess reserves.

If a Bank Has $1 Million of Deposits,a Required Reserve