The figures in the table below are for a single commercial bank. All figures are in thousands of dollars. Refer to the data given above. If the required reserve ratio is 10 percent, the bank has excess reserves of:

Question

The figures in the table below are for a single commercial bank. All figures are in thousands of dollars.  Refer to the data given above. If the required reserve ratio is 10 percent, the bank has excess reserves of:

Quizplus · Accepted Answer

Excess reserves are calculated as total reserves minus required reserves. The required reserves can be calculated as 10% of the bank's total deposits, which is $200,000 x 0.10 = $20,000. The total reserves of the bank are deposits of $200,000 plus excess reserves, which we need to find. We can set this up as an equation: $200,000 = $20,000 + excess reserves. Solving for excess reserves, we get $180,000. Subtracting the required reserves of $20,000, we get excess reserves of $160,000. Therefore, the correct answer is B, or $22,000.

The Figures in the Table Below Are for a Single