Suppose the desired reserve ratio is 10 percent.If the Commerce Bank has total deposits of $20,000,total assets of $10,000,and actual reserves of $8000,the amount of excess reserves is
A)$2,000.
B)$6,000.
C)$800.
D)$100.
E)$0.

Question

Quizplus · Accepted Answer

The required reserves for Commerce Bank are 10 percent of its total deposits, which is $2,000 ($20,000 × 0.1 = $2,000). The actual reserves is given as $8,000, which is higher than the required reserves of $2,000. Therefore, the excess reserves can be calculated by subtracting the required reserves from the actual reserves: $8,000 − $2,000 = $6,000.

Suppose the Desired Reserve Ratio Is 10 Percent