A bank with $200 million in transaction deposits keeps $20 million in cash in the bank vault, $10 million in deposits at the Fed, and $10 million in government securities in the bank vault. Its total reserves equal

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Quizplus · Accepted Answer

The total reserves of the bank includes the cash held in the vault ($20 million), the deposits at the Fed ($10 million), and the government securities held in the vault ($10 million). Therefore, the total reserves of the bank is $20 million + $10 million + $10 million = $30 million. Option A is not correct because total deposits ($200 million) does not equal to reserves. Option B is not correct because it only includes the cash held in the vault. Option D is too high as it includes deposits also.

A Bank with $200 Million in Transaction Deposits Keeps $20