Table 11-4.

-Refer to Table 11-4. If the bank faces a reserve requirement of 20 percent, then it
A) has $10,000 of excess reserves.
B) needs $10,000 more reserves to meet its reserve requirements.
C) needs $5,000 more reserves to meet its reserve requirements.
D) just meets its reserve requirement.

Question

Table 11-4.
 
-Refer to Table 11-4. If the bank faces a reserve requirement of 20 percent, then it
A) has $10,000 of excess reserves. 
B) needs $10,000 more reserves to meet its reserve requirements. 
C) needs $5,000 more reserves to meet its reserve requirements. 
D) just meets its reserve requirement.

Quizplus · Accepted Answer

If the reserve requirement is 20%, the bank needs to hold 20% of its deposits as reserves. If it is short by $5,000, it means it currently holds less than the required reserves and needs an additional $5,000 to meet the requirement.

Table 11-4. -Refer to Table 11-4. If the Bank Faces a Reserve