Refer to the information provided in Table 10.8 below to answer the questions that follow.
Table 10.8
-Refer to Table 10.8. If the required reserve ratio were changed to 10% and Alamo Bank continues to hold $1,200,000 in reserves, its excess reserves will be

Question

Refer to the information provided in Table 10.8 below to answer the questions that follow.
Table 10.8 
-Refer to Table 10.8. If the required reserve ratio were changed to 10% and Alamo Bank continues to hold $1,200,000 in reserves, its excess reserves will be

Quizplus · Accepted Answer

If the required reserve ratio is 10%, then the required reserves for Alamo Bank would be 10% of its deposits. If Alamo Bank holds $1,200,000 in reserves, the excess reserves are the total reserves minus the required reserves. Assuming the deposits are $6,000,000 (since $1,200,000 is 20% of $6,000,000), the required reserves would be $600,000 (10% of $6,000,000). Therefore, the excess reserves would be $1,200,000 - $600,000 = $600,000.

Refer to the Information Provided in Table 10