The Vancouver Bank's balance statement is as follows:
All figures are in billions.

-Refer to the above information and,assuming that desired reserve ratio is 10 percent,after a cheque for $20,000 is drawn and cleared against this bank,its excess reserve will be:

Question

The Vancouver Bank's balance statement is as follows:
All figures are in billions.
 
-Refer to the above information and,assuming that desired reserve ratio is 10 percent,after a cheque for $20,000 is drawn and cleared against this bank,its excess reserve will be:

Quizplus · Accepted Answer

The desired reserve ratio is 10%, which means the bank is required to hold 10% of its deposits as reserves. 
Before the cheque is drawn and cleared, the bank's total deposits are $800 billion. 
Thus, the required reserves are 10% of $800 billion, which is $80 billion. 
The bank's actual reserves, however, are $100 billion. 
Therefore, its excess reserves are $100 billion - $80 billion = $20 billion. 
When the $20,000 cheque is drawn, the bank's total deposits decrease to $799,980 billion. 
The required reserves are now 10% of $799,980 billion, which is $79,998 billion. 
The bank's actual reserves remain at $100 billion. 
Therefore, its excess reserves are $100 billion - $79,998 billion = $9,002 billion, rounding to $9,000 billion.

The Vancouver Bank's Balance Statement Is as Follows