Suppose a bank has $200 million as transaction deposits, and holds $25 million as reserves.If the reserve requirement is uniformly 10% on any positive amount, the bank's excess reserves equals

Question

Quizplus · Accepted Answer

The bank is required to hold 10% of $200 million in reserves, which equals $20 million. Since it holds $25 million, its excess reserves are $25 million - $20 million = $5 million.

Suppose a Bank Has $200 Million as Transaction Deposits, and Holds