Question

If a bank has $100 in cash in its vault, $2,000 in loans to customers, and $400 in deposits at the Federal Reserve, then the bank's reserves are: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices
$100.
$400.
$500.
$2,500.

Answer 1

Answer:

$500

Explanation:

A bank's reserves refer to the sum of the amount of cash physically held by the bank, and deposits held in the bank's account with the Federal Reserve.

In our case therefore,

Cash held by bank = $100

Cash held by Federal Reserve =$400

Total = $100 + $400 = $ 500