If a bank has deposits of $100000,cash in its vault of $10000,and $15000 on deposit at the Bank of Canada and if the required reserve ratio is 20%,then the bank has:

Question

Quizplus · Accepted Answer

The required reserve ratio is 20%, which means the bank is required to keep 20% of its deposits as reserves.

Required reserves = 20% of $100000 = $20000

The bank has cash reserves of $10000 and $15000 on deposit at the Bank of Canada, which totals to $25000.

Excess reserves = Total reserves - Required reserves
Excess reserves = $25000 - $20000
Excess reserves = $5000

Therefore, the bank has excess reserves of $5000.

If a Bank Has Deposits of $100000,cash in Its Vault