If a bank has deposits of $100,000, cash in its vault of $10,000, and $15,000 on deposit at the Federal Reserve and if the required reserve ratio is 20%, then the bank:

Question

Quizplus · Accepted Answer

The bank's total reserves are the sum of cash in vault and deposits at the Federal Reserve, which is $10,000+$15,000 = $25,000.
The required reserves would be 20% of the deposits, which is 20%*$100,000 = $20,000.
Therefore, the required reserves are $20,000 and the actual reserves held by the bank are $25,000.
This means that the bank has excess reserves of $5,000 ($25,000 - $20,000).

If a Bank Has Deposits of $100,000, Cash in Its