Suppose the XYZ bank has excess reserves of $4,000 and demand deposits of $80,000. If the required reserve ratio is 25 percent, the banks total reserves equal:

Question

Quizplus · Accepted Answer

The required reserve ratio is 25%, which means that the bank is required to keep 25% of its demand deposits as reserves. Therefore, the required reserves for the XYZ bank would be:

$80,000 x 0.25 = $20,000

Since the bank already has excess reserves of $4,000, its total reserves would be:

$20,000 + $4,000 = $24,000

Suppose the XYZ Bank Has Excess Reserves of $4,000 and Demand