Question

Third National Bank has reserves of $10,000 and checkable deposits of $100,000. The reserve ratio is 10 percent. Households deposit $15,000 in currency into the bank, and the bank adds that currency to its reserves. What amount of excess reserves does the bank now have?

Answer 1

Answer:

$13,500

Explanation:

Calculation for what amount of excess reserves does the bank now have

First step is to calculate the Total deposit using this formula

Total deposit=Checkable deposits+Currency deposit

Let plug in the formula

Total deposit=100,000+15,000

Total deposit=115,000

Second step is to calculate the required reserve

Required reserve= 115,000x.10

Required reserve=11,500

Third step is to calculate the Reserves using this formula

Reserves = Already Existing reserves + Currency deposit that was added to reserves

Reserves= 10,000+15,000

Reserves=25,000

Last step is to calculate the Excess reserves using this formula

Excess reserves = Reserves - Required reserves

Let plug in the formula

Excess reserves= 25,000-11,500

Excess reserves= $13,500

Therefore the amount of excess reserves that the bank now have will be $13,500